THE 

ARTHUR  YOUNG 

ACCOUNTING 

COLLECTION 


Graduate  School  of 
Business  Administration 

Library  of  the 

University  of  CaUfomia 

Los  Angeles 


HIGHER  ACCOUNTANCY 

Principles  and  Practice 


The  texts  listed  on  this  page  form  the  basic 
material  for  the  LaSalle  Higher  Accountancy- 
Course  and  Service.  They  are  designed  to  meet 
the  demand  for  efficient  training  in  the  more 
advanced  branches  of  accountancy,  preparatory 
to  public  or  private  practice  or  to  passing  the 
Certified  Public  Accountant  examination  as 
given  by  the  several  states. 


Titles 

ELEMENTS  OF 
ACCOUNTING    . 


PRINCIPLES  OF 
ACCOUNTING 


Authors 


H.  T.  ScoviLL,  A.B.,  C.P.A. 
Professor  of  Accountancy, 
Unwersity  of  Illinois 


FACTORY  ACCOUNTING  ' 


AUDITING  PROCEDURE 


Frank  E.  V^^ebner,  C.P.A. 
Consulting  Cost  Accountant 

^  William  B.  Castenholz,  A.M.,  C.P.A. 
LaSalle  Extension   University 


BUSINESS  LAW    .      .      ,  '  .  .4  Samuel  D.  Hirschl,  S.B.,  J.D. 

Late  Member  of  the  Illinois  Bar 


ORGANIZING  A  BUSINESS 


^  Maurice  H.  Robinson,  Ph.D. 
University  of  Illinois 


LaSalle  extension  Universitv' 


FACTORY  ACCOUNTING 


FRANK  E.  WEBNER,  C.P.A, 

Factory  Cost  Specialist 
Author  of  Factory  Coats 


La  Salle  Extension  University 
*     ChiccLg'o     ^ 

1921 

40C)?)7 


Copyright,   1917 

All  Rights  Reserved  in  All  Countries 

LaSallk  Extension  University 


Bus.  Admlili 
Library 

SG  86 


PREFACE 

That  branch  of  accountancy  practice  which  we  may 
call  ^'factory  accounting,"  has  assumed  great  impor- 
tance during  the  last  few  years  of  rapid  industrial  evolu- 
tion. Methods  are  constantly  changing — technique  is 
constantly  improving.  The  large  and  complex  indus- 
trial units  require  not  only  accurate  accounting,  but  also 
economical  accounting.  It  is  with  this  thought  in  mind 
that  the  following  pages  have  been  written. 

Factory  accounting  is   a  broader  classification  than 
^  cost  accounting,  although  it  comprehends  cost  account- 
■i  ing,  of  course.     Any  discussion  of  factory  accounting 
2  will  cover  headings  that  the  narrower,  and  more  tech- 
nical, subject  of  cost  accounting  must  omit. 
j;.     In  writing  this   volume,   the   author  has   constantly 
,;  borne  in  mind  the  complexity  of  this  subject  for  the  stu- 
dent and  has  endeavored  to  clarify  the  presentation  by 
;'the  liberal  use  of  charts,  graphs,  and  forms.    In  many 
r  cases  forms  have  been  filled  in  with  illustrative  figures, 
which  are  carried  throughout  the  book,  thus  enabling  the 
reader  to  observe  the  relationship  existing  between  the 
several  forms.     It  is  hoped  that  this  articulation  will 
simplify  the  subject  for  the  student. 

The  work  has  not  been  written  solely  for  the  beginner, 
however.  Its  principal  claim  for  a  place  among  the  many 
splendid  texts  already  published  is  its  presentation  of 
working  methods  and  efficient  technique.  The  subject 
of  mechanical  aids  may  not  be  ignored  in  any  volume 

ill 


ir  Preface 

which  pretends  to  be  more  than  a  mere  discussion  of 
basic  theory,  since  the  entire  routine  of  accounting  prac- 
tice has  been  changed  during  the  past  decade  by  the 
introduction  of  novel  mechanical  devices.  We  have, 
therefore,  devoted  liberal  space  to  this  phase  of  practical 
accounting  for  factories. 

This  book  is  presented  for  the  consideration  of  account- 
ants, manufacturers,  and  accounting  students  generally, 
with  the  belief  that  it  will  fill  a  real  gap  which  has  been 
observed  in  the  existing  literature  on  the  subject. 


CONTENTS 


PART  ONE— ORGANIZATION 

I.    Organization — Synthesis  and  Analysis 

Production  Prerequisites 1 

Production  Zones 4 

II.    Organization — The  Human  Element 

Importance  of  the  Human  Element 13 

The  Management 16 

The  Superintendent 19 

The  Foreman    20 

The  Workmen 21 

III.  Organization — Responsibility 

Types  of  Organization 25 

The  Military  Organization    25 

The  Functional  Organization  26 

The  Committee  Organization 27 

Efficiency  Requirements 27 

Assigning  Responsibilities  28 

IV,  Organization  Charts 

Making  Organization  Charts 32 

Charting  Line  Control  35 

Charting  Functional  Control   38 

Charting  the  Routine  of  an  Order 39 

Chart  Details 42 


PART  TWO— CONTROLLING  RECORDS 

V.    Controlling  Accounts 

Definition  of  Controlling  Accounts 46 

Routine  of  Controlling  Entries 51 

Classification  of  Accounts 5^ 

V 


vi  Contents 

VI.    Starting  the  General  Exhibit 

Mechanical  Features 65 

Opening  the  Exhibit 70 

"Active  Assets  Group"  Entries 72 

"Passive  Assets  Group"  Entries 75 

"Various  Assets  Group"  Entries 77 

"Liabilities-Group"  Entries  77 

VII.    Current  Exhibit  Entries 

Order  of  Entries 80 

Exchequer  Accounts 81 

Subsidiary  Records   85 

Types  of  Cross  Entries 88 

Summary  of  Entries 92 

Interim  Statements 97 

VIII,     Closing  the  General  Exhibit 

Order  of  Entries 102 

Sales  102 

Purchases — Material    105 

Production  Register 107 

Suspense  and  Reserve  Items 108 

Expense   108 

Summary  of  Entries 109 

Closing  Operations 113 

IX.     The  Cash  Account 

Relationship  to  General  Exhibit 115 

Cash  Receipts  Sheet 122 

Types  of  Cash  Receipts  Entries 125 

Analytical  Columns 130 

Check  Register  Sheet 133 

Types  of  Check  Register  Entries 135 

X.    Purchases 

Antecedent  Records    141 

The  Voucher  System 142 

The  Purchase  Analysis 146 

Types  of  Entries 151 

Summary  of  Entries 155 

XI.    Specific  Order  Production 

Characteristic  Features  of  Specific  Order  Plan.  158 

Production  Order  Forms 162 


Contents  vii 

Cost  Sheets  164 

The  Production  Register 164 

Credits  of  the  Production  Register 170 

Mechanical  Aids    173 

Summary  of  Entries 177 

XII.    Process  Production 

Characteristic  Features  of  Process  Production. .  181 

Departmental  Accounts   184 

Standard  Costs 187 

Production  Registers 191 

Production  Summaries 197 

XIII.    Convergent  Methods 

Definition 202 

Machine-Hour  and  Sold-Hour  Plans 203 

The  Point  Method 207 

The  Sheet  System  212 

The  Block  System 214 

The  Budget  System 217 


PART  THREE— INDUSTRIAL  CLASSIFICATION 

XIV.    Types  op  Production 

Classes  of  Production  Industries 222 

Synthetic  Manufacturing 225 

Ajnalytic  Manufacturing 227 

Antecedent  Assembling  Preparation 229 

Reciprocal  Assembling  Preparation 233 


PART  FOUR— PRODUCTION  ELEMENTS 

XY.    Material 

Physical  Audits  238 

Stock  Ledger 244 

Purchases  247 

Automatic  Records   253 

Purchase  Cards,  Automatic 257 

Finished  Order  Cards,  Automatic 259 

Material  Issuance  Cards,  Automatic 261 

Material  Issuance  Cards    263 

Various  Material  Forms 267 


viii  Contents 

XVI.    Labor 

Time  Registration   271 

Time  Reports   272 

Using  Time  Reports 274 

Nonproductive  and  Dead  Time 276 

Planning  Rack  279 

Mechanical  Aids 283 

Pay  Summaries 288 

Bonus  Earnings 295 

XVII.    Expense  (Overhead) 

Importance  of  Proper  Distribution 299 

Uniformity  of  Practice 301 

Expense  Diffusion  302 

The  Labor-Percentage  Plan    305 

The  Man-Hour  Plan 310 

The  Sold-Hour  Plan 312 

The  Machine-Hour  Plan   313 

The  List-Percentage  Plan  314 

The  Process  Plan 315 

XVIII.    Expense  Analysis 

Analyzing  Expense  317 

Expense  Summaries   319 

Expense  Analysis   320 

Commercial  Costs 324 

Departmental  Distribution  of  Expense 326 

Expense  Distribution   329 

Administrative  Costs 337 

Indirect  Producing  Departments 338 

Closing  Entries 340 


LIST  OF  LLUSTRATIONS 

Inasmuch  as  the  following  named  figures  are  largely  used  for 
examples  with  relation  to  one  another  and  reference  and  com- 
parison are  to  be  made  under  the  coordinated  systems  described, 
it  is  not  planned  that  the  various  figures  be  intentionally  placed 
at  or  near  the  text  describing  or  referring  to  them.  In  many 
cases  to  locate  them  thus  would  be  impossible  without  congestion 
and  confusion  of  other  forms,  as  cross  references  occur  in  too 
many  places  in  the  text.  In  the  case  of  some  of  the  forms  of 
labor  reports  no  specific,  but  only  a  general,  mention  is  made  in 
the  text ;  hence  the  exact  location  of  any  particular  figure  is  not 
vital  so  long  as  it  is  readily  accessible  and  is  convenient  to  scru- 
tinize in  conjunction  with  the  text. 

The  figures  are  in  topical  sequence  and  for  the  most  part 
appear  on  the  left-hand  pages  with  fairly  even  regularity  but 
without  reference  to  the  adjoining  text;  this  being  a  means  of 
ready  reference  from  any  portion  of  the  book — a  self -indexing 
feature.  Also,  when  once  located,  a  more  direct  view  may  be  had 
of  the  desired  figure  than  possible  from  the  right-hand  page 
without  more  frequent  page  turning  when  used  in  connection 
with  subsequent  reading  matter.  With  but  few  exceptions  all 
references  made  in  the  text  occur  subsequent  to  the  figures  cited, 
and  in  the  greater  part  of  these  exceptions  the  figures  are  placed 
at  the  right-hand  side  for  convenient  scrutiny. 

By  the  intentional  left  or  right  insertion  of  ' '  tipped  in ' '  forms 
it  is  possible  for  the  reader  to  have  unfolded  within  his  range 
of  vision  both  the  records  that  are  being  considered.  This  makes 
it  very  similar  to  two  separate  books  spread  out  for  reference. 

Fig.     1.     Industrial  Management  Channels 2 

Fig.     2.     Essential  Aids  to  the  Master  Mind 14 

Fig.     3.     Analogy  to  Teamwork 28 

Fig.    4.     Chart  Illustrating  Line  Control  in  the  Automo- 
bile Industry    30 

Fig.     5.     Chart    Illustrating    Functional    Control    in    the 

Meat-Packing  Industry 34 

ix 


X  List  of  Illustrations 

Fig.     6.     Chart  Illustrating  the  Routine  of  an  Order  for 

Crowding  Engines  in  a  Steam  Shovel  Works.  36 
Fig.     7.     Chart  Showing  the  Relation  Existing  between  a 

Business  and  Its  Accounts 48 

Fig.     8.     Chart     Showing    the     Routine    of     Controlling 

Entries  50 

Fig.     9.     Chart  of  Accounts 52 

Fig.  10.    Plan  for  Book  Made  Up  of  Long  and  Short  Leaves  62 

Fig.  11.     General  Exhibit,  Opening  Entries 64 

Fig.  12.     General  Exhibit,   Current  Entries 66 

Fig.  13.     Adding  Machine  Strip  of  Interim  Footings 72 

Fig.  14.     Daily  Report — Master  and  Slip  Sheets 74 

Fig.  15.     General  Exhibit,  Closing  Entries 76 

Fig.  16.     Cash  Receipts  Sheet 78 

Fig.  17.     Check  Register  Sheet 80 

Fig.  18.     Record  of  Goods  Ordered 84 

Fig.  19.     Purchase  Analysis 86 

Fig.  20.     Production  Register 88 

Fig.  21.     Diagram    Showing    Increase    of    Manufacturing 

Costs  by  Departments 92 

Fig.  22.     Diagram    Showing    Increase    of    Manufacturing 

Costs  b}'-  Elements 96 

Fig.  23.     Summary  of  Machine  Hours   98 

Fig.  24.     Summary  of  Yarn  Production 104 

Fig.  25.     Summary  of  Textile  Production   106 

Fig.  26.     Summary  of  Dye  House  Production 110 

Fig.  27.     Summary  of  Blast    Furnace    Production    (Left- 
Hand  Side  of  Sheet) 116 

Fig.  28.     Summary  of  Blast  Furnace  Production   (Right- 

Hand  Side  of  Sheet) 117 

Fig.  29.     Peak  Sheet  under  Point  System 120 

Fig.  30.     Departmental  Block  Sheet 124 

Fig.  31.     Chart  Showing  Various  Classes  of  Production...  128 

Fig.  32.     Stock  Ledger  Card 130 

Fig.  33.     Purchase  Requisition    136 

Fig.  34.     Purchase  Order 138 

Fig.  35.     Punched  Card  for  Purchases  144 

Fig.  36.     Punched  Card  for  Finished  Orders  146 

Fig.  37,     Punched  Card  for  Material  Issuances  150 

Fig.  38.     Material  Card 152 

Fig.  39.     Excess  Material  Card 156 

Fig.  40.     Semifinished  Goods  Card 160 

Fig.  41.     Order  Tag  with  Material  Requisition  Coupon 162 

Fig.  42.     Order  Tag  with  Material  Report  Coupon 166 


List  of  Illustrations  xi 

Pig.  43.     Report  Form  for  Material  Used 169 

Fig.  44.     Bill  of  Material 174 

Fig.  45.     Storekeeper's  Receipt  for  Finished  Parts  (Upper 

Figure)    178 

Fig.  46.     Summary  of  Material  Issuances  (Lower  Figure) .   178 

Pig.  47.     Adding  Machine  Summary  of  Material  Costs 182 

Pig.  48.     Stock  Report 185 

Fig.  49.     Departmental  Inventory 190 

Fig.  50.     Equipment  Inventory 194 

Fig.  51.     Defective  Work  Report 196 

Fig.  52.     Time  Work  on  Specific  Order 200 

Fig.  53.     In  and  Out  Card.    Report  of  Work  Done 204 

Fig.  54.     Start  and  Stop  Card.     One  Job 206 

Fig.  55.     Start  and  Stop  Card.     Ten  Jobs   208 

Fig.  56.     Start  and  Stop  Card.     Written   Description 214 

Fig.  57.     Start  and  Stop  Card.     Outside  Repair  Job 216 

Fig.  58.     Time  Stamp  Card.     One  Job 219 

Fig.  59.     Time  Stamp  Card.     Ten  Jobs   222 

Fig.  60.     Elapsed  Time  Impression.    Machine  Shop 224 

Fig.  61.     Elapsed  Time  Impression.    Machine  and  Operator  228 

Fig.  62.     Elapsed  Time  Impression.    Press  Room 232 

Fig.  63.     Departmental  Report  Form  for  Reverse  of  Any 

Clock  Card 234 

Fig.  64.     Start  and  Stop  Coupons  for  Specific  Jobs  by  One 

Operative  during  One  Day 240 

Fig.  65.     Start  and  Stop  Coupons  for  Orders  Processed  by 

One  Operative  during  One  Day 242 

Pig.  66.     Start  and  Stop  Coupons  for  Various  Operations 

on  One  Specific  Order.     Time  Work 246 

Pig.  67.     Piecework  Coupons  for  Various  Operations  on  One 

Dozen  Garments.    Standard  Production 248 

Pig.  68.     Elapsed  Time  Impression  and  Perforation 252 

Pig.  69.     Labor  Card  Punched  from  Separate  Time  Records  256 

Fig.  70.     Job  Ticket  for  One  Day.    Time  Written 2f60 

Fig.  71.     Job  Ticket  for  One  Day.    Time  Indicated  in  Quar- 
ter Hours    264 

Fig.  72.    Daily  Time  Report.     Time  Indicated  by   Time 

Unit  Numbers  (Six  Minutes) 268 

Pig.  73.     Job  Ticket  for  Week.    Time  Indicated 277 

Fig.  74.     Daily  Time  Report.    Time  Written 279 

Fig.  75.     Timekeeper's  Sheet  (By  Processes) 281 

Pig.  76.     Piecework  Record  for  Premium  Docks 282 

Fig.  77.     Planning  Rack 285 

Pig.  78.     Card  Pocket 287 


xii  List  of  Illustrations 

Fig.  79.  Indicator  Cards  287 

Fig.  80.  Adding  Machine  Sheet  for  Daily  Time  Reports . .  293 

Fig.  81.  Pay  Roll  Master  Sheet 300 

Fig   82.  Pay  Roll  Form.     Sold-Hour  and  Machine-Hour 

Plans 309 

Fig.  83.  Expense  Analysis    328 

Fig.  84.  Expense  Distribution  340 


FACTORY  ACCOUNTING 


PART  ONE— ORGANIZATION 

CHAPTER  I 
organization— synthesis  and  analysis 

Production  Peerequisites 

Production  is  the  process  of  creating  that  which  is 
formed  or  produced  by  labor  or  by  mental  application, 
as  the  products  of  manufacture,  of  commerce,  or  of  art. 
Commercial  production  primarily  consists  in  converting 
assets  from  one  state  or  condition  to  other  states  or 
conditions  and  usually  involves  many  steps  or  grades, 
each  an  important  part  of  a  perfect  whole. 

An  old  adage  cites  that  it  takes  money  to  make 
money.  It  is  as  true  to-day  as  it  was  in  other  years, 
albeit  the  proportions  of  profit  to  investment  to-day  are, 
broadly  speaking,  larger  than  they  were  in  times  gone 
by.  Modem  machinery,  intelligently  used,  makes  this 
possible.  Any  manufacturing  business  having  funds 
permanently  or  temporarily  invested  requires  the  fur- 
ther expenditure  of  money  to  keep  the  business  afloat, 
as  there  can  be  no  such  condition  as  standing  still ;  reflex 
action,  involving  dry  rot,  would  immediately  set  in. 

Material,  labor,  and  manufacturing  expense  (very  com- 

1 


2  Factory  Accounting 

monly  known  as  ''overhead"  or  ''burden")  are  the  three 
constituent  elements  of  production.  All  of  these  are 
equally  important,  for  no  two  can  be  combined  without 
the  aid  of  the  third.  In  other  words,  there  can  be  no 
conunercial  production  without  bringing  into  combina- 
tion these  three  elements,  and  the  ultimate  purpose  of 
this  blending  operation  is  usually  a  final  exchange  into 
the  asset  with  which  the  process  ordinarily  starts,  i.  e., 
cash  (or  its  equivalent).  If  the  business  is  successful, 
the  amount  of  cash  realized  on  the  completion  of  the 
cycle  is  greater  than  the  amount  of  cash  originally 
invested  (representing  the  "know  how"  of  the  master 
mind) ;  but  in  any  stage  of  the  process  the  values  on 
hand  are  merely  cash  in  another  form  and  should  be 
guarded  and  accounted  for  with  the  same  jealous  care. 
As  a  matter  of  fact,  in  modem  factories  each  of  the  three 
production  elements  is  as  closely  checked  as  cash,  and 
the  advantage  of  such  a  condition  is  great.  When  a  close 
record  is  kept,  the  exact  status  of  all  asset  accounts  and 
the  exact  condition  of  all  material  on  hand  can  be  ascer- 
tained without  leaving  the  office.  This  permits  of  the 
short  cost  period  so  essential  to  accurate  cost  finding.  It 
also  gives  a  knowledge  and  close  touch  of  the  business 
that  can  be  secured  in  no  other  way.  In  short,  an  effect- 
ive modem  system  of  factory  accounting  enables  the 
factory  to  be  run  from  the  office — a  wonderful  advantage 
under  any  circumstances,  and  particularly  so  when  a 
business  is  under  stress  of  competition. 

Primarily  there  is  no  necessary  relation  between  the 
three  physical  elements  of  cost.  A  very  large  amount 
of  labor  may  be  expended  upon  material  of  insignifi- 
cant value,  as  is  the  case  in  the  manufacture  of  many 
instruments  of  precision,  where  the  material  may  cost 
but  a  few  cents,  while  the  labor  and  manufacturing 


iT 

)r 
a- 

:s. 

a- 
m 
es 
to 
li- 
af 
?e 
?n 

te 
at 
!te 

it 
.n- 
re- 

;es 
^re 
ni- 
ny 
of 

)fit 
;  a 

its, 
ive 
er- 
or- 


loss  AND  6AIN     >  PPOCUCT  COST  ELEMEKTS  ^mW  INVESTMENT  "ffi 


c 


# 


c 


Synthesis  and  Analysis  3 

expense  involved  amount  to  many  dollars.  On  the  other 
hand,  the  material  may  be  very  costly,  while  the  labor 
and  manufacturing  expense  involved  are  of  small  com- 
parative cost,  as  in  the  manufacture  of  plain  gold  rings. 

Factory  accounting  analyzes  costs,  operation  by  opera- 
tion, and  supplies  the  manager  with  invaluable  data  from 
which  to  work  in  reducing  costs.  Its  effectiveness  does 
not  stop  here.  If  it  is  decided  to  start  a  campaign  to 
increase  the  efficiency  of  the  factory  force  and  to  elimi- 
nate the  inefficient  men,  then  the  individual  records  of 
the  men  will  be  secured  from  the  cost  records.  In  large 
bodies  of  workmen  a  steady  and  intelligent  campaign 
along  these  lines  will  work  wonders. 

An  efficient  factory  accounting  system  will  operate 
automatically  to  reduce  costs,  from  the  mere  fact  that 
under  its  close  supervision  and  its  full  exposure  of  waste 
and  inefficiency,  employees  work  better  and  are  mor^ 
careful  of  material  and  mechanisms.  Beyond  this  it 
will,  as  time  proceeds,  bring  to  the  attention  of  the  man- 
agement many  conditions  in  the  establishment  not  pre- 
viously considered,  or  perhaps  not  known  at  all. 

An  adequate  factory  accounting  system  also  indicates 
fluctuations  in  production  costs  and  shows  just  where 
these  variations  take  their  rise,  resulting  in  more  uni- 
form production  prices  and  a  greater  general  economy 
of  production,  finding  expression  at  the  completion  of 
the  cycle  in  large  dividends. 

When  a  producer  stakes  his  chances  of  loss  or  profit 
upon  a  guess  as  to  what  his  goods  cost,  he  becomes  a 
gambler.  He  jeopardizes  not  only  his  own  interests, 
but  also  the  interests  of  his  competitors,  who  must  strive 
to  meet  his  frequently  impossible  prices,  and  the  inter- 
ests of  the  trade  at  large,  which  he  is  helping  to  demor- 


4  Factory  Accounting 

alize  by  Ms  **  unfair  prices. '^  When  he  fails,  the  whole 
industrial  fabric  is  affected  by  both  the  act  and  the 
record  of  failure,  and  he  not  infrequently  carries  down 
with  him  other  institutions,  entailing  heavy  loss  upon 
hundreds  and  even  thousands  of  people  who  did  not 
even  know  that  their  interests  were  related  to  his. 

Peoduction  Zones 

Figure  1,  opposite  page  3,  is  an  allegorical  or  symbol- 
ical chart  demonstrating  visually  the  advancement  of 
production  elements  through  the  various  phases  or  zones 
involved.  An  aphorism  recites:  *'He  of  least  under- 
standing taunts  and  sneers  the  most,"  and  it  seems 
timely  to  preface  the  description  of  the  chart  with  the 
statement  that  it  is  not  intended  as  an  exhibit  of  jointless 
pipe,  aerially  poised  tanks,  and  other  seemingly  anom- 
alous physical  conditions.  Merely  a  front  elevation  is 
shown  with  no  accompanying  side  elevation  or  plan; 
hence  relative  capacities  of  tanks,  pipes,  etc.,  are  not 
intended  to  be  determined  from  this  chart. 

Zone  1:  Liquid  Assets. — A  prime  prerequisite  of  any 
business  undertaking  is  cash,  or  its  equivalent  in  suffi- 
cient quantity  and  fluent  condition  to  admit  of  quick 
conversion.  This  is  represented  in  the  chart  by  the 
tank  labeled  "Exchequer." 

Zone  2:  Executive  Control. — The  end  and  aim  of  all 
business  enterprise  is  profit,  but  the  degree  of  success 
of  any  business  is  gauged  by  the  acumen  of  its  manager, 
together  with  his  ability  to  get  at  facts  concerning  his 
affairs  whereby  to  shape  his  course.  A  river  can  rise 
no  higher  than  its  source,  nor  can  an  executive,  on 
occasion,  rise  higher  than  his  source  of  information. 
Any  attempts  to  do  so  are  but  flights  into  the  face  of 


Synthesis  and  Analysis  5 

providence — conjectures — guesses.  There  can  be  no 
effective  organization  and  system  of  any  high  degree  of 
efficiency  without  accurate,  adequate,  and  properly  used 
records.  Statistics  show  that  nine  out  of  every  ten 
business  failures  are  the  direct  result  of  ignorance  of 
the  real  conditions,  which  would  have  been  revealed  by 
a  proper  accounting  system.  Accurate  and  efficient 
records  are  quite  as  important  to  a  business  as  are 
charts  and  compass  to  a  ship  at  sea,  showing  the  loca- 
tion of  the  shoals  which  menace  disaster,  indicating  the 
channels  in  which  the  water  is  deep  and  safe,  and  point- 
ing surely  and  steadily  the  course  to  be  followed. 

In  any  large  and  broadly  successful  business,  the 
accounting  department  is  looked  upon  as  one  of  the  most 
important  factors  of  success,  and  the  larger  and  more 
successful  the  operations  of  such  a  business,  the  greater 
pains  to  maintain  an  adequate  and  effective  system  of 
accounts. 

In  the  chart  the  executive  is  shown  in  instant  control 
of  the  assets  of  the  enterprise,  guided  by  compilations 
of  facts  conveyed  to  him  from  the  accounting  department 
of  the  business.  Within  his  reach  is  the  valve-stem  con- 
trolling the  profits  or  dividends  typified  by  *' barrels  of 
money,"  which  in  the  majority  of  cases  is  the  happy 
result  of  closely  watched  and  intelligently  used  cost  data. 

Zone  3:  Investment. — For  a  business  not  guided  by  a 
full  and  complete  knowledge  of  its  affairs,  the  prospec- 
tive profits  may  fitly  be  characterized  as  **will  of  the 
wisp."  In  this  chart,  however,  a  full  and  complete 
knowledge  is  represented,  and  the  prospective  profits  are 
indicated  by  a  balloon  in  leash,  the  continued  captivity 
of  which  rests  solely  with  the  pressure  maintained  by 
the  sales  department  (Zone  7). 


6  Factory  Accounting 

As  so-called  ''fixed  assets"  are  not  regularly  subject 
to  increment,  the  tanks  representing  such  are  shown  in 
the  chart  with  lids  do^vn;  they  are,  however,  subject  to 
the  will  of  the  management  by  means  of  rods  and  cranks 
connecting  directly  with  the  controlling  levers  for  execu- 
tive control  (Zone  2). 

The  ''stores  and  stocks"  tank  is  next  to  the  "goods  in 
process"  tank,  with  interconnecting  tubes  representing 
the  passing  of  material  stores  into  process  and  the  pass- 
ing of  finished  parts  and  finished  product  from  process 
into  stocks.  This  latter  conversion  of  assets  is  not  fur- 
ther depicted,  inasmuch  as  all  lines  of  production  (such 
as  this  chart  essays  to  cover  broadly)  do  not  carry  fin- 
ished or  partially  finished  stocks  made  up  in  advance. 
The  tank  representing  goods  in  process  is  shown  as  being 
closed,  which  in  this  case  would  represent  a  normal 
volume  of  work  in  process  at  all  times  and  hence  a  fairly 
steady  amount  of  values  invested,  subject  to  the  will  of 
the  management.  The  tank  representing  stores  is  showTi 
as  being  open  to  receive  the  continual  flow  of  replenish- 
ing investment  in  material  and  supplies  that  is  neces- 
sary to  any  groVing  manufacturing  industry.  There  is 
in  this  character  of  investment  a  fairly  steady  amount 
of  values  involved,  subject  to  a  constant  withdrawal 
for  use  in  goods  in  process ;  this  use  is  pictured  by  the 
pipe  from  the  stores  tank  to  a  tank  representing  material 
and  supplies  (Zone  5).  The  latter,  together  with  the 
tank  representing  direct  labor  (Zone  5),  receives  a  con- 
stant replenishing  flow  of  investment.  Inasmuch  as 
some  lines  of  production  put  all  material  through  stores 
before  putting  it  into  process  and  other  lines  pass  the 
great  bulk  of  material  purchases  immediately  into  proc- 
ess, it  is  quite  impossible  to  represent  closely  all  lines 
of  production  in  this  one  illustration.     In  the  case  of 


Synthesis  and  Analysis  7 

direct  labor  there  is  not  such  a  variance  in  principle, 
although  there  is  in  detail. 

In  the  case  of  investment  in  prospective  profits  there 
is  no  let-up  on  the  flow  of  expenditures;  this  flow,  how- 
ever, is  in  the  nature  of  advertising  and  selling  costs 
of  various  kinds,  and  the  receiving  tank  (Zone  4)  is 
shown  as  a  sales  department  burden.  It  is  quite  likely 
that  some  executives  would  advocate  showing  prospec- 
tive profits  as  a  tank  in  Zone  3.  There  is  no  analogy, 
however,  as  physically  land  and  buildings  have  an 
intrinsic  value  under  any  condition,  whereas  prospective 
profit  (ordinarily  known  as  ''goodwill")  is  too  closely 
involved  and  dependent  upon  the  tank  (Zone  6)  char- 
acterized as  ''profit  developer"  to  be  other  than  a  cap- 
tive balloon,  the  safe  anchorage  of  which  is  solely 
dependent  upon  the  efficiency  of  the  sales  department. 

Zone  4:  Overhead. — The  manufacturing  expense  items 
are  shown  as  passing  from  their  respective  tanks  into 
Zone  5  immediately  below  to  be  analyzed  and  properly 
segregated  over  the  various  production  departments. 
Chapters  XVII  and  XVIII  treat  this  phase  more  fully. 

Commercial  costs  are  depicted  as  passing  from  the 
tank  on  down  to  Zone  7  to  be  absorbed  into  loss  and 
gain. 

Zone  5:  Cost  Elements. — Departmental  Burden. — Of 
the  three  elements  of  production  cost,  expense  is  unques^ 
tionably  the  most  difficult  to  detennine  accurately,  and 
even  when  this  is  done,  the  end  in  view  is  but  half 
attained.  The  expense  burden,  or  overhead,  as  deter- 
mined is  still  to  be  applied  to  the  manufactured  prod- 
uct, so  that  it  will  in  connection  with  the  charge  of  labor 
and  material  disclose  the  true  cost  of  production. 

The  important  part  expense  plays  in  production  cost 


8  Factory  Accounting 

and  tlie  necessity  for  its  proper  distribution  are  not 
always  recognized.  The  cost  of  labor  and  material 
stands  out  clearly.  Usually  such  costs  are  closely  coupled 
with  specific  order  numbers,  or  with  mass  production 
processes,  or  with  departmental  costs,  and  are  brought 
into  further  prominence  by  clearly  defined  payments  at 
fixed  times.  Factory  overhead,  on  the  other  hand,  made 
up  from  many  varying  sources,  not  clearly  seen,  indi- 
rect in  its  application  and  scattered  as  to  time  of  pay- 
ment, is  very  much  more  difficult  of  determination  and 
does  not  seem  so  worthy  of  consideration.  Yet  the  weight 
of  the  overhead  expense,  or  burden,  is  in  many  cases  the 
factor  that  decides  the  success  or  failure  of  an  enter- 
prise. These  overhead  charges  frequently  amount  to 
100  per  cent,  125  per  cent,  and  even  much  more,  of  the 
direct  wages.  It  is  therefore  often  really  more  impor- 
tant that  they  should  be  correct  than  that  the  actual  labor 
cost  should  be  correct.  Chapters  XVII  and  XVIII  treat 
fully  on  expense  distribution   over  departments. 

Zone  5:' Cost  Elements — Material. — ^When  a  modern 
plan  of  factory  accounting  is  in  use,  an  accurate  record 
of  the  issuance  of  material  is  extremely  important  and 
the  physical  issuance  should  be  under  the  immediate 
supervision  of  trained  clerks.  Chapter  XV  treats  fuUy  on 
this  element. 

Zone  5:  Cost  Elements — Direct  Labor. — The  impor- 
tance of  true  time  reports  cannot  be  emphasized  too 
strongly,  for  without  them  accurate  cost  finding  is  impos- 
sible. If  less  time  is  reported  on  some  particular  job 
than  was  actually  consumed,  then  some  other  job  has  to 
bear  the  burden,  and  the  findings  of  the  factory  account- 
ing system  are  false  and  misleading. 

Time  reports  vary  widely  in  form  and  method  of  use. 


Synthesis  and  Analysis  9 

The  most  efficient  form  of  time  report  under  any  con- 
dition is  one  on  which  both  the  beginning  and  the  fin- 
ishing time  are  recorded  by  a  time-recording  device. 
This  records  the  facts  and  precludes  the  falsification  and 
evasion  possible  under  almost  any  other  conditions. 

Chapter  XVI  deals  fully  with  the  various  factors 
entering  into  the  proper  allocation  of  direct  labor 
charges. 

Zone  6:  Product. — The  first  step  in  the  manufacture 
of  an  article  or  product  under  a  modem  factory  account- 
ing system  is  the  issuance  of  a  production  or  assembling 
order,  which  is  a  general  authorization  from  the  master 
mind  to  those  concerned  to  proceed  with  the  manufacture 
indicated.  This  they  do  in  accordance  with  the  formali- 
ties and  routine  of  the  particular  factory. 

In  the  chart  the  works  manager  is  depicted  as  a  well- 
infoimed  official,  fully  equipped  to  direct  the  efforts  of 
his  forces.  The  flow  of  costs  of  the  three  production 
elements  shows  on  gauges  accessible  to  him,  and  such 
flow  is  controlled  by  valves.  He  is  surrounded  by  vari- 
ous tests  of  accuracy  and  means  for  eliminating  unneces- 
sary costs.  The  ''cost  bug,"  a  colloquialism  typifying 
the  time  and  cost  department,  is  assiduously  searching 
through  a  medium  for  facts  concerning  goods  in  proc- 
ess, the  records  of  these  facts  being  typified  by  the 
cabinet  and  book  close  to  the  works  manager's  hand  and 
representing  past  performance  and  the  various  ramifi- 
cations of  cost  data. 

The  tank  on  the  right  hand,  labeled  **  Profit  Devel- 
oper," represents  brain  product — ^not  of  the  sales  man- 
ager alone,  but  of  the  entire  force  of  officials  under  one 
of  the  rules  of  efficiency;  i.  e.,  all  officials  work  toward 
the  same  end.    For  the  sales  manager  to  do  effective  and 


IC  Factory  Accounting 

enduring  work,  the  product  must  be  right  and  at  a  pro- 
duction cost  that  admits  of  a  profit  at  prices  interesting 
to  the  possible  buyer. 

Zone  7:  Loss  and  Gain. — Efficiency  or  scientific  man- 
agement is  not  a  thing  reserved  for  the  comprehension 
of  the  elect.  It  is  not  a  thing  to  take  fright  at;  it  is, 
on  the  contrary,  only  common  sense  applied  to  everyday 
affairs,  the  doing  of  a  thing  in  a  better,  a  quicker,  and  a 
more  economical  way  than  at  present,  the  doing  of  a 
thing  in  the  right  way,  the  easy,  the  adept,  the  direct, 
and  the  natural  way,  rather  than  the  careless,  the  slov- 
enly, the  wrong,  and  the  roundabout  way. 

Efficiency  has  a  widespread  application  and  may  be 
practiced  generally  by  everyone  in  some  form  or  another. 
Efficiency  is  the  duty  not  only  of  every  man  to  himself, 
but  of  every  man  to  his  neighbor,  and  most  certainly  of 
every  manager  to  his  business.  It  is  the  slogan  that 
means  prosperity — a  watchword  of  honest  effort  and 
well-directed  energy. 

If  a  hundred  men  have  a  certain  work  to  perform 
week  in  and  week  out,  a  few  of  them  will  presently 
be  found  to  execute  the  work  with  greater  ease  and  dis- 
patch than  the  rest,  and  of  these  few,  one  will  be  found 
who,  with  less  expenditure  of  energy  and  time  than  any 
of  the  others,  accomplishes  the  work  better.  This  is 
as  true  of  accounting  procedures  as  of  direct  produc- 
tion. That  man  is  the  efficient  man;  he  has  evolved  the 
efficient  method.  That  method  should  be  made  known  to 
all  and  followed  by  all,  and  a  high  degree  of  efficiency 
will  be  the  result  for  all.  Those  who  are  willing  to  learn 
will  progress,  but  those  who  cling  to  their  old  methods 
and  refuse  to  learn  will  fail. 

Every  possible  improvement  should  be  known  and  con- 


Synthesis  and  Analysis  11 

sidered,  instead  of  being  ignored  until  it  forces  its  way 
into  use.  Merit  should  be  sought  out  wherever  it  may  be 
found,  instead  of  being  choked  off  and  forced  to  fight  its, 
perhaps  half-starved,  way  to  the  front. 

As  long  as  a  manager  is  satisfied  that  he  has  nothing 
more  to  learn  about  his  business,  he  will  learn  nothing 
more,  but  when  he  realizes  that  he  is  not  yet  the  master 
of  the  accumulated  knowledge  of  the  world  on  his  sub- 
ject, he  will  progress.  Once  in  the  swing  and  step  of 
progress,  he  can  readily  keep  abreast  of  his  competitors 
and  apply  to  his  own  problems  the  results  which  have 
been  and  are  constantly  being  achieved  by  others.  We 
are  told  that  next  to  his  own  affairs  a  good  manager 
should  know  what  his  competitor  is  doing.  This  bespeaks 
for  the  manager  a  knowledge  of  his  own  affairs,  which 
is  a  requisite  of  continued  success  in  modern  manufac- 
turing and  merchandising  and  has  a  very  direct  influ- 
ence upon  the  Loss  and  Gain  Account. 

In  the  chart.  Figure  1,  the  functions  of  the  sales 
management  are  clearly  visualized.  From  a  tank  in  Zone 
6  comes  a  stream  typifying  finished  product,  and  simi- 
larly from  a  tank  in  Zone  4  comes  a  stream  typifying 
commercial  costs.  There  is  a  pressure  gauge  on  each 
of  these  pipes  to  indicate  to  the  sales  manager  just 
what  he  may  expect,  and  also  each  pipe  is  equipped 
with  a  valve  which  is  to  indicate  that  the  sales  man- 
ager can,  over  each,  exert  more  or  less  control. 

From  a  tank  in  Zone  6  comes  a  pipe  with  neither 
gauge  nor  valve.  This  typifies  ''profit  developer"  or 
"know  how,"  and  every  ounce  that  can  be  drained  from 
that  tank  is  allowed  to  pour  without  let  or  hinderance; 
hence  no  valve  is  needed.  A  gauge  is,  in  this  connec- 
tion, not  needed  for  high  pressure;   the   executive  in 


12  Factory  Accounting 

Zone  2  can  telephone  the  sales  manager  of  any  low- 
pressure  condition. 

The  flow  from  these  various  pipes  would  soon  have 
the  sales  manager  entirely  submerged  if  he  did  not  pump 
out  a  sufiScient  volume  to  protect  himself  and  to  main- 
tain at  least  the  minimum  pressure  in  the  pipe  running 
upward  to  the  tank  in  Zone  1  to  keep  the  gauge  (Zone 
4)  from  dropping  and  thus  snipping  the  cord  and  freeing 
the  captive  balloon  in  Zone  3. 

The  present  volume  deals  directly  with  the  details 
involved  in  the  accounting  processes  here  represented  by 
the  recording  gauges.  The  accounting  results  are  con- 
veyed to  the  management  perhaps  pneumatically  as  here 
shown,  perhaps  otherwise;  in  any  case  the  cycle  is  com- 
pleted. 


CHAPTER  II 

organization— the  human  element 

Impoetance  of  the  Human  Element 

The  ultimate  end  and  aim  of  all  commercial  produc- 
tion is  profit  in  one  form  or  another.  Profit  is  the 
excess  of  revenue  over  costs ;  without  profit  there  can  be 
no  commercial  success.  There  is  no  royal  road  to  suc- 
cess, and  to  him  who  scrutinizes  the  record,  step  by 
step,  the  course  of  financial  and  engineering  successes,  it 
becomes  clearly  evident  that  every  man  is  the  architect 
of  his  own  personally  acquired  fortune. 

Success  is  not  accidental,  although  seemingly  acci- 
dental combinations  may  at  times  bring  about  conditions 
which,  of  necessity,  are  prerequisite  to  success  and  thus 
hasten  the  achievement  of  the  desired  end.  The  greatest 
successes  are  achieved  by  those  men  who  are  endowed 
by  nature  with  the  happy  faculty  of  picking  able  lieu- 
tenants to  perform  or  oversee  the  details. 

Business  success  depends  upon  the  accurate  grading 
and  blending  of  various  elements.  The  three  physical 
elements,  material,  labor,  and  expense,  are  prerequisite; 
yet,  even  more  important  than  these,  is  the  human  ele- 
ment. It  is  by  far  the  most  perplexing  to  reconcile  and 
adjust.  From  end  to  end  of  the  industrial  fabric  weak- 
ness,  deficiency,   prejudice,   and   selfishness    appear   at 

13 


14 


Factory  Accounting 


[personalityW 
(training  ) ^  , 


MCOURAQEJ 
NESS      I  \  J 


Fig.  2. — Essential  Aids  to  the  Master  Mind 


The  Human  Element  15 

inopportune  times  and  under  disconcerting  conditions, 
developing  friction  and  causing  unexpected  and  trouble- 
some complexities.  Even  with  these  formidable  foes  to 
success,  the  executive  head  of  a  business  is  expected  at 
all  times  to  keep  his  temper,  preserve  intact  the  capital 
invested,  endure  the  fiercest  competition,  bear  inevitable 
losses  and  crosses,  and  yet  show  a  net  profit  at  the  end 
of  the  year. 

The  control  of  human  energy  is  the  objective  point  of 
successful  management.  A  business  is  not  made  suc- 
cessful, it  is  not  made  big,  it  is  not  made  at  all,  by  mere 
material  and  machinery  and  buildings  and  tools  or  by 
anything  tangible.  Big  men  make  a  business  big,  and  the 
qualities  that  make  men  big  are  intangible.  Mere  hard 
work  will  not  bring  success.  There  must  be  behind  the 
work  an  ability  that  will  make  it  accomplish  something. 
And  that  ability  must  include  a  fitting  respect  for  the 
man-power  without  which  any  system  or  management 
is  an  inert  machine. 

Men  as  a  whole  prefer  to  sell  their  time  rather  than 
their  labor  and  to  perform  in  that  time  the  amount  of 
labor  they  consider  proper  for  the  pay  received.  In  other 
words,  they  prefer  to  work  by  the  day  and  be  themselves 
the  judges  of  the  amount  of  work  they  shall  do  in  that 
day.  While  this  is  true,  a  very  large  number  of  them  are 
willing  to  do  any  reasonable  amount  of  work  the 
employer  may  specify  in  that  time,  provided  only  they 
are  shown  how  it  can  be  done  and  are  paid  substantial 
additional  amounts  of  money  for  doing  it. 

While  subject  to  human  frailties,  nevertheless  the 
great  majority  of  workmen  are  to  be  influenced  by  clear, 
logical  reasoning.  They  are,  at  heart,  faithful.  This  is 
important,  for  every  machine  in  a  factory,  every  part  of 


16  Factory  Accounting 

the  product,  every  sale  made,  every  dollar  of  investment 
depends  for  its  efficiency  on  a  man.  Contented  men  give 
a  better  result  than  mere  men.  Enthusiastic  men  give 
a  better  result  than  merely  contented  men.  Men  with 
pride  in  their  work,  with  enthusiasm  in  their  blood,  and 
with  loyalty  in  their  hearts  can  accomplish  the  seemingly 
impossible. 

The  Management 

Accounting  is  a  vital  element  of  business.  Progres- 
sive management  is  a  most  potent  factor  of  continued 
success  in  modem  manufacturing.  Conditions  in  the 
industrial  world  are  constantly  and,  at  times,  rapidly 
changing,  and  unless  factory  conditions  keep  pace  with 
the  changing  requirements,  the  relegation  of  the  non- 
progressive factory  to  the  industrial  scrap  heap  is  but 
a  matter  of  time. 

The  advantages  of  a  proper  system  of  production 
accounting  records  are  so  direct  and  so  obvious  that 
objections  on  the  part  of  the  management  would  hardly 
be  expected.  As  a  matter  of  fact,  hesitancy,  procrasti- 
nation, and  objection  commonly  characterize  the  mana- 
gerial heads  when  the  subject  of  factory  accounting 
is  broached.  To  these  the  very  word  ''system"  implies 
something  mysterious — something  big  and  unwieldy 
and  certainly  something  expensive.  The  idea  of  *■ '  organ- 
ization" is  not  coordinate  with  thoughts  of  economical 
management.  To  these  the  idea  of  ''system"  is  indis- 
solubly  linked  with  "red  tape."  "System"  to  them 
means  additions  to  their  clerical  force,  and  additions  to 
their  clerical  force  mean  additional  dollars  spent  upon 
"nonproducers."  They  will  refuse  to  admit  the  advisa- 
bility of  systems  sufficient  to  care  for  their  heavy  factory 


The  Human  Element  17 

interests,  and  yet  they  have  sufficient  intelligence  to  keep 
up  their  general  accounting  system. 

The  objections  urged  against  the  introduction  of 
closer  production  accounting  plans  are  many.  To  the 
advocate  of  accounting  improvements  the  manufacturer 
will  declare  in  good  faith  that  he  is  in  close  personal 
touch  with  every  detail  of  his  business,  particularly  with 
the  cost  of  his  product,  and  that  the  installation  of  a 
complete  plan  of  records  would  be  a  superfluous  elabora- 
tion. The  observance  of  any  logical  routine  in  the 
handling  of  business  is  so  repugnant  to  the  training  and 
style  of  some  business  men  that  they  take  refuge  in  the 
absurdity  that  all  '^ system"  is  red  tape.  That  this 
attitude  on  the  part  of  business  men  is  too  general  and 
often  fatal,  is  generally  conceded  by  those  whose  occu- 
pations, such  as  bankers,  lawyers,  judges,  professional 
accountants,  referees  in  bankruptcy,  etc.,  bring  them  into 
close  contact  with  the  facts  and  figures  side  of  business 
troubles  or  failures. 

Another  manufacturer  will  say  that  he  contracts  for 
his  raw  material  on  an  annual  basis  and  that  for  this 
reason  prices  of  material  do  not  fluctuate  with  him ;  that 
he  employs  his  shophands  on  a  piecework  basis  entirely 
and  therefore  knows  his  labor  costs  to  the  fourth  deci- 
mal; and  that  his  overhead  is  quite  readily  distributed 
over  his  product  at  a  given  percentage  of  labor  cost. 

Yet  another  manufacturer  will  say  that  his  records 
are  kept  so  that  his  costs  for  material,  labor,  and 
expenses  in  each  department  are  clearly  shown  and  that 
accurate  estimates  can  therefore  be  made  of  the  cost  of 
any  individual  article  or  product  when  these  are  needed. 

Yet  again,  a  manufacturer  taking  a  less  vulnerabk 
position  declares  that  he  has  a  specialty  and  enjoys  such 


18  Factory  Accounting 

exceptionally  favorable  conditions  that  competition  is 
practically  eliminated;  that  he  knows  he  is  making 
money  and  is  satisfied  with  results  as  they  are ;  and  that 
the  estimation  of  costs  on  individual  articles  is  of  no 
interest  to  him. 

And  so  the  argument  runs.  Human  nature  prompts 
the  manager  to  combat  any  intimation  that  his  plans 
or  arrangements  are  not  of  the  best,  and  yet  in  the  inner 
councils  of  his  staff  puzzling  losses,  unexplained  short- 
comings, and  profits  that  should  have  been  made  but 
were  not,  are  constantly  up  for  perplexed  discussion — 
conditions  which  should  be  an  all-sufficient  reason  for 
better  accounting  or  for  a  more  intelligent  application 
of  that  already  in  use. 

The  average  business  executive  fails  to  get  more  than 
a  small  part  of  the  vital  facts  and  statistics  that  he 
should  have  to  control  the  activities  of  a  business  intel- 
ligently. The  desire  to  avoid  the  expense  of  the  neces- 
sary system,  that  will  bring  such  vital  statistics  to  the 
executive  desk,  has  created  this  condition.  Even  where 
managerial  inertness  does  not  take  the  form  of  open 
opposition  to  the  introduction  of  a  cost  system,  it  may 
yet  be  fatal  because  of  its  reluctant  adoption  of  modem 
methods,  because  of  its  strict  adherence  to  the  tenets 
of  the  stone-blind  '^practical"  man  who  never  does  any- 
thing unless  it  is  mouldy  with  precedent. 

The  old  idea  was  to  keep  one's  methods  a  secret,  on 
the  general  assumption  that  the  things  hidden  from  a 
competitor  were  the  things  that  made  a  concern  big  and 
successful.  This  fallacy  has  happily  to  a  large  extent 
been  broken  down,  and  to-day  manufacturers  of  similar 
commodities  get  together  in  stated  conventions  for  the 
discussion    of  uniformity    in    cost    accounting    plans. 


The  Human  Element  19 

Among  STicli  are  printers,  lithographers,  bankers,  manu- 
facturers of  machine  tools,  furniture,  elevators,  paper 
boxes,  envelopes,  cut  glass,  shoes,  etc. 

A  cost  system  once  installed  naturally  does  not 
encounter  the  active  opposition  of  the  management,  but 
it  is  frequently  injured  almost  as  seriously  by  captious 
criticism  or  an  almost  hostile  indifference.  This,  when 
present,  coming  almost  entirely  from  the  older  genera- 
tion, is  an  absolutely  indefensible  position.  The  instal- 
lation of  a  factory  accounting  plan  should  not  be 
authorized  until  the  management  is  either  con^dnced  of 
its  merits  or  willing  to  give  it  a  fair  trial.  Once  decided 
upon,  there  should  be  no  hindrance  and  no  wavering  or 
turning  from  the  task.  The  installation  of  a  new  system 
in  a  large  industrial  plant  involving  even  slight  changes 
in  the  habits  and  practices  of  hundreds  of  men  is,  as 
already  suggested,  bound  to  encounter  more  or  less 
serious  opposition — an  opposition  that  cannot  as  a  rule 
be  overcome  successfully  save  with  the  encouragement, 
support,  and  active  assistance  of  those  in  control.  As  a 
matter  of  good  practice  and  good  business,  the  new  sys- 
tem should  have  the  warmest  and  heartiest  support  of 
every  official ;  particularly  should  this  support  be  warmly 
active  in  the  beginning  and  until  the  successful  opera- 
tion of  the  new  system  has  become  a  mere  matter  of 
routine. 

The  Superintendent 

In  the  thoroughly  modern  shop  the  superintendent  is 
conversant  with  every  process  and  with  every  part  of 
every  operation.  This  involves  a  knowledge  of  the  cost 
of  each  process  or  of  each  operation  and  in  turn  each 
element  or  section  and  in  turn  the  cost  of  the  completed 


20  Factory  Accounting 

whole.  It  is  the  duty  of  the  superintendent  to  keep  a 
general  supervision  in  its  entirety,  increasing  efficiency 
and  decreasing  costs  wherever  possible. 

With  such  duties  the  full  cooperation  of  the  super- 
intendent and  of  his  immediate  subordinates  is  essential 
to  the  efficiency  of  any  comprehensive  factory  account- 
ing plan.  If  the  superintendent  is  inclined  to  oppose  the 
plan,  it  is  likely  to  prove  a  failure.  If  he  is  lukewarm, 
the  difficulties  of  successful  installation  and  operation 
are  great.  If,  on  the  other  hand,  he  is  enthusiastic  and 
determined  to  produce  the  best  possible  results,  the  suc- 
cess of  a  well-adapted  system  of  cost  finding  is  prac- 
tically assured. 

Many  good  men  aim  to  serve  faithfully  the  cause  of 
the  banner  under  which  they  are  enlisted,  yet  along  cer- 
tain lines  outside  this  beaten  path  are  not  gifted  with 
inventive  genius  and  hesitate  to  take  the  initiative.  Some 
are  so  reluctant  to  accept  innovations  that  at  times  pres- 
sure must  be  brought  to  bear  upon  them. 

The  superintendent's  support  should  not  be  hard  to 
enlist.  If  he  is  capable,  he  will  readily  appreciate  the 
value  of  an  efficient  system  of  factory  accounting.  If 
in  any  case  the  superintendent  is  found  to  be  opposed  to 
the  introduction  of  improved  methods  and  his  opposition 
cannot  be  overcome,  the  installation  either  would  better 
be  deferred  to  a  more  favorable  season,  or  would 
better  be  preceded  by  the  employment  of  a  new  and 
more  modern  superintendent. 

The   Foreman 

It  is  a  foregone  conclusion  that  both  foreman  and 
workmen  will,  to  some  extent,  resist  all  attempts  to 
secure  accurate  data  concerning  labor  operations.     A 


The  Human  Element  21 

good  factory  accounting  system  properly  operated  will 
tend  to  prevent  shirking,  reduce  dead  time,  and  increase 
efficiency,  but  in  doing  this  it  will  demand  greater  effort 
and  more  steady  application  on  the  part  of  the  men.  It 
also  recessitates  a  closer  supei^vision  of  both  men  and 
machixies  and  a  general  **drawing-in"  of  the  industrial 
process  all  around. 

Because  of  this  and  from  a  general  apprehension  that 
the  new  order  of  things  may  in  some  way  work  to  their 
disadvantage,  the  men  will  almost  inevitably  oppose  the 
installation  of  an  efficient  factory  accounting  plan.  In 
this  the  foreman  is  apt  to  side  with  the  men.  He  may 
really  wish  to  advance  the  interests  of  the  management, 
but  his  heart  is  with  the  men  and  especially  so  where  he 
has  served  his  time  in  subordinate  capacities  in  the  par- 
ticular department  over  which  he  now  holds  sway. 

If  the  whole  matter  is  presented  to  the  foreman  prop- 
erly and  through  him  to  the  men,  the  support  of  both 
should  be  secured.  If  it  cannot,  the  condition  is  one 
which  must  be  treated  individually.  In  several  cases 
which  have  come  under  the  author's  personal  observa- 
tion, the  dismissal  of  foremen,  otherwise  seemingly  good, 
who  opposed  the  installation  of  a  cost  system  has  had  a 
very  salutary  effect.  A  foreman  is  not  really  good  if  he 
persists  in  working  at  cross  purposes  with  the  man- 
agement. 

The  Workmen 

The  typical  patient,  plodding  workman  has  not  many 
aerial  flights  of  thought  while  plying  his  trade.  He  may 
have  a  veritable  storehouse  of  technical  knowledge  and 
a  wide  range  of  usefulness  in  his  particular  line  and  yet 
have  no  genius  further  than  to  apply  to  a  new  purpose 


^2  Factory  Accounting 

some  movement  or  process  lie  lias  seen  demonstrated. 
He  is  known  as  a  ''practical"  man;  many  such  develop 
into  foremen,  and  good  foremen  where  other  qualifi- 
cations are  present. 

The  theorist  and  the  inventor  have  conceptions  which 
they  want  realized ;  the  function  of  the  practical  man  is 
to  carry  out  the  plan  of  the  theorist.  Each  needs  the 
other,  for  it  is  an  almost  infallible  inile  that  the  so- 
called  "practical"  man  is  prone  to  measure  any  plans 
by  immediate  results  and  fails  to  discern  the  greater 
and  broader  results  which  the  theorist  has  in  mind. 

It  oftentimes  seems  a  hopeless  task  for  the  workman 
to  comprehend  the  aim  and  object  of  the  systemizer's 
efforts.  Quite  generally  the  practical  man  is  lamentably 
wanting  in  the  very  point  where  the  other  man  excels — 
the  organizing  faculty.  Take  a  typical  workman  from 
the  bench  where  he  has  never,  so  to  speak,  had  to  look 
beyond  his  nose,  and  place  him  in  a  position  of  responsi- 
bility and  command,  and  he  is  completely  at  sea.  Unless 
be  be  endowed  with  exceptional  qualifications,  he  turns 
out  hopelessly  slattern  or  ineffectual,  or  a  martinet,  or  a 
bully;  h3  has  slight  sense  of  perspective  and  stickles 
absurdly  over  little  points,  while  he  lets  the  great  ones 
go;  and  it  is  almost  impossible  for  him  to  look  before 
and  after  as  he  should  do  or  to  bring  to  a  proper  focus 
a  whole  field  of  consideration. 

The  successful  installation  of  a  factory  accounting  sys- 
tem depends  largely  upon  the  proper  frame  of  mind 
of  the  workmen.  On  the  surface  it  might  appear  that  the 
employees  in  a  factory  have  nothing  to  do  but  to  fol- 
low instructions.  This  is  true,  but  they  will,  if  the  spirit 
of  insubordination  is  abroad,  follow  instructions  with 
such  density  of  apprehension  as  to  make  the  general  plan 


The  Human  Element  23 

of  factory  records — no  matter  how  well  it  may  have  been 
devised — burdensome,  ineffective,  and  costly.  Employees 
are  never  glad  to  see  changes  of  routine.  They  do  not 
understand  them,  and  being  ig-norant  of  the  purpose, 
they  generally  imagine  they  mean  the  worst  results  to 
themselves. 

The  workmen  must  be  carefully  considered  and  have 
brought  to  bear  upon  them  all  the  managing  ability  which 
has  for  its  aim  and  purpose  the  inculcation  of  the  right 
ideals  of  work,  faith  in  the  business,  and  enthusiasm  for 
its  prosperity.  If  the  men  can  be  shown  that  any  pro- 
posed new  factory  accounting  plan  is  not  hostile  to  them, 
if  they  can  be  induced  to  give  it  their  cheerful  support, 
to  make  their  reports  promptly  and  correctly,  and  to 
accept  suggestions  for  economy  of  time  and  material 
without  ill-feeling,  it  makes  strongly  for  the  success  of 
the  plan  and  goes  far  to  increase  its  ultimate  effective- 
ness and  value. 

A  comprehensive  factory  accounting  plan  if  properly 
used  gives  a  close  and  intelligent  comparison  of  indi\T.d- 
ual  effort  and  leads  to  the  proper  classification  of 
employees.  This  is  obviously  to  the  advantage  of  the 
employees  and  should  be  appreciated  by  them.  These 
comparative  records,  however,  act  in  themselves  to  stim- 
ulate the  men  and  eliminate  much  unnecessary  wastage 
of  tizie,  and  this  more  immediately  apparent  feature  does 
not  appeal  to  the  average  employee.  On  the  contrary, 
it  is  a  strong  argument  in  the  minds  of  many  workmen 
against  anything  tinctured  with  system. 

This  opposition  should,  however,  be  easily  removed 
if  the  men  have  confidence  in  the  management.  Greater 
productive  efficiency  of  labor  should  be  advantageous 
to  both  employer  and  employee,  for  increase  in  efficiency 


24  Factory  Accounting 

makes  possible  the  payment  of  high  wages,  and  it  may 
be  added  that  without  efficient  labor,  high  wages  cannot 
be  paid  indefinitely,  for  every  wasteful  operation,  every 
mistake,  every  useless  move  has  to  be  paid  for  by  some- 
body, and  in  the  long  run  the  workman  has  to  bear  his 
share. 


CHAPTER  III 
organization— responsibility 

Types  of  Okganization 

In  modem  production  there  are  three  recognized  types 
of  industrial  organization,  namely,  the  military,  the  func- 
tional, and  the  committee.  These  may  be  known  by 
names  of  similar  nature  meaning  the  same  thing. 

The  Melitaky  Organization 

The  military  system  is  perhaps  the  oldest  and  until 
recent  years  was  the  only  plan  practiced.  Under  this 
scheme,  all  power  and  authority  originates  with  one 
executive  head,  who  is  held  responsible  for  everything 
that  is  done  in  any  part  of  the  division  under  his  con- 
trol. Every  officer  in  each  division  or  subdivision  is  held 
responsible  for  all  that  happens  within  his  province.  If 
a  foreman  has  charge  of  a  department  and  runs  behind 
in  his  orders,  is  extravagant  in  the  consumption  of  sup- 
plies or  power,  or  is  deficient  in  the  quality  of  work 
turned  out,  he  alone  is  responsible.  He  is  expected  to 
look  after  the  details  and  accomplish  results;  he  must 
keep  his  men  at  work,  must  see  that  machines  are  in 
good  working  order,  and  must  be  able  to  judge  the  fit- 
ness of  his  men.  He  must  detect  inaccuracies,  determine 
the  causes,  and  apply  the  remedies.  In  short,  he  must 
be  a  thorough  all-around  man  to  fill  his  place  properly. 

This  is  spoken  of  as  ''line  control." 

25 


26  Factory  Accountin-g 

The  Functional  Oeganization 

In  military  line  control  the  commander-in-chief  does 
not  discuss  the  details  of  all  his  far-reaching  plans  with 
his  line  oflScers.  Under  the  military  staff  principle 
special  officers  are  appointed  to  furnish  trained  guidance 
along  special  lines.  The  arrangement  of  all  interlocking 
details  is  necessary  to  successful  campaigns,  and  success 
depends  upon  the  coordinated  total  of  all  their  efforts. 
Industry  avails  itself  of  the  expert  knowledge  of  trained 
men  and  we,  therefore,  have  the  counterpart  of  military 
staff  control  in  what  is  called  ''functional  control." 

The  functional  system  of  organization  consists  in 
dividing  the  work  of  management  so  that  each  subordi- 
nate officer  shall  have  as  few  functions  as  possible  to 
perform.  The  scheme  applies  the  ''division  of  effart" 
theory  to  the  management.  The  shop  workmen,  accord- 
ing to  this  plan,  work  under  the  direction  of  several 
foremen  instead  of  but  one.  In  a  machine  shop  under 
this  plan,  a  gang  boss  has  charge  of  preparing  the  work 
up  to  the  time  the  piece  is  set  in  the  machine.  He  shows 
his  workmen  how  to  set  the  work  on  the  machine  in  the 
quickest  time  possible  and  in  the  best  way.  The  speed 
boss  provides  proper  tools  and  sees  that  the  cuts  are 
correctly  started  and  at  the  maximum  speed.  The 
inspector  is  responsible  for  the  quality  of  the  work,  and 
both  workmen  and  speed  boss  must  finish  work  to  suit 
him.  The  repair  boss  sees  to  it  that  each  machine  is 
kept  in  clean,  oiled,  and  perfect  working  condition.  In 
addition  to  these  four  shop  overseers,  the  workmen 
come  into  contact  with  the  representatives  of  the  plan- 
ning department,  whose  function  is  to  relieve  the  shop 
foremen  of  all  thought  of  how  the  work  should  be 
arranged  and  distributed  to  the  machines. 


Responsibility  27 

The  Committee  Organization 

The  committee  system  of  control  involves  the  forma- 
tion or  appointment  of  functional  committees  made  up 
of  the  best  talent  available  to  cover  each  one  of  the  sev- 
eral functions.  To  weld  these  committees  an  executive 
committee  is  organized  to  exercise  control.  It  is,  of 
course,  as  important  to  make  a  correct  choice  of  the  per- 
sonnel of  the  committees  as  it  is  to  define  their  func- 
tions and  responsibilities.  The  exact  scope  of  these 
committees  naturally  will  vary  according  to  the  nature 
of  the  industry,  but  in  a  general  way  a  few  may  be  cited : 
engineering  and  drafting  committee,  planning  committee, 
conditions  committee,  operations  committee,  materials 
committee,  and  relations  and  incentives  committee. 
These  committees  hold  their  meetings  at  their  o"wti  dis- 
cretion and  carefully  consider  matters  referred  to  them. 
Decisions  are  referred  to  the  executive  committee  for 
final  adjudication,  which,  if  favorable,  makes  the  pro- 
cedure binding.  In  this  type  of  management  the  indi- 
vidual departmental  head  or  foreman  is  used  in  a  more 
or  less  functional  capacity. 

Efficiency  Requieements 

The  best  mechanical  equipment  of  a  plant  that  money 
can  buy  avails  but  little  if  labor  is  not  properly  utilized. 
On  the  other  hand,  the  efficient  utilization  of  labor  wall 
often  overcome  the  handicap  of  a  very  poor  equipment. 

A  high  degree  of  labor  efficiency  cannot  be  secured 
unless  there  is  fair  dealing  and  proper  feeling  between 
management  and  men.  Their  rights  must  be  respected; 
their  status  must  be  reasonably  sure ;  and  their  person- 
ality must  receive  proper  consideration.    Each  man  has 


28 


Factory  Accounting 


^is  own  peculiarities,  and  any  system  of  management  or 
discipline  too  inflexible  to  allow  some  latitude  for  varia- 
tions from  the  normal  does  not  measure  up  to  modern 
requirements  and  will  not  secure  the  best  results. 


Fig.  3. — Analogy  to  Teamwork 

The  conditions  under  which  labor  is  performed  must 
also  receive  careful  attention.  If  the  arrangement  of 
the  shop  is  convenient,  if  tools  are  at  hand  when  needed, 
if  work  in  process  is  routed  so  as  to  avoid  all  unneces- 
sary handling  and  hauling,  if  the  conditions  of  physical 
comfort  are  properly  cared  for,  all  these  act  directly  and 
materially  to  increase  efficiency  and  decrease  costs.  The 
creation  of  an  ideal  equipment  solves  about  one-half  the 
problem  of  efficient  management.  The  plant  must  be 
put  under  a  satisfactory  organization  before  it  can  be 
well  managed. 

The  most  successful  factory  organizations  are  those  in 
which  all  departments  having  to  do  with  production  in 
any  manner  are  subordinate  to,  and  responsible  to,  one 
general  head.  Under  this  plan  the  factory  departments 
are  clean-cut  as  to  results,  as  each  department  head  is 
responsible  to  the  central  controlling  officer  without  any 
intervening  influences  or  interferences. 


Assigning  Eesponsibilities 

Even  though  an  executive  be  an  all-round  genius,  he 
cannot  personally  direct  the  minute  details  of  a  busi^ 


Responsibility  29 

ness  of  which  he  formulates  the  general  plans.  Before 
assigning  any  administrative  function  and  outlining  its 
corresponding  responsibilities,  there  must  be  determined 
a  certain  ideal  point  to  g-uide  the  master  mind.  There 
must  be  kept  in  view  the  need  of  specific  details  and  the 
conformity  thereof  to  the  general  plans. 

Control  has  its  installation  as  well  as  its  administra- 
tive aspect.  In  the  former  sphere  it  fixes  the  relations 
of  persons  throughout  the  plant.  In  the  latter  sphere  it 
selects  the  right  personalities  to  fill  the  posts  whose  duties 
are  thus  fixed  and  supervises  their  daily  performance  of 
these  duties.  Control  is  to  the  business  what  the  nerv- 
ous system  is  to  the  body.  It  conveys  orders  from  the 
master  mind  (central  brain) ;  it  responds  to  stimulation 
from  without;  and  it  is  more  than  a  mere  telegraph 
system  of  nerves,  for  it  has  well-marked  secondary  nerv- 
ous centers,  forming  local  subordinate  brains  concerned 
with  special  duties  and  responding  automatically  to 
stimulation  without  the  central  brain  being  concerned. 

There  is  a  place  at  which  the  problem  of  keeping  in 
touch  with  the  specific  details  of  the  agencies  of  the 
action  controlled  approximately  equals  in  perplexity  the 
problem  of  increasing  touch  with  the  general  plan  of 
which  such  action  is  a  part.  To  converge  functions  from 
this  place  towards  the  master  mind  is  to  lose  touch  with 
specific  conditions ;  to  radiate  them  closer  to  the  agencies 
of  performance  is  to  lose  touch  with  the  general  plan. 

As  organizations  expand,  one  function  after  another 
should  be  deputized  to  others  down  the  administrative 
line,  drawn  to  subordinate  levels  by  the  necessity  of  an 
accurate  knowledge  as  to  the  nature  and  extent  of  the 
changes  set  up  by  production.  Modem  management 
is  coming  more  and  more  to  be  based  on  measurement, 


30  Factory  Accounting 

and  if  wise  decisions  and  judicious  control  are  to  result, 
accurate  detail  records  must  be  set  up. 

The  definition  of  just  what  constitutes  detail  for  an 
officer  in  a  growing  organization  is  expansive.  Man- 
agement gradually  enlarges  from  a  mere  directing  force 
to  a  coordinating  agency. 

From  the  vantage  ground  of  a  superior  officer,  this 
sifting  of  everything  to  its  proper  level  is  the  problem 
of  the  subordination  of  detail.  The  man  of  capacity 
often  errs  by  working  with  energy  rather  than  intel- 
ligence, not  seeing  that  efficiency  means  not  only  to  do 
a  great  deal,  and  to  do  it  well,  but  also  to  be  engaged 
constantly  upon  tasks  of  fitting  caliber.  If  an  organiza- 
tion is  not  large  enough  to  keep  a  man  of  talent  at  his 
maximum  work,  the  permanent  solution  is  not  to  allow 
the  individual  to  add  lower  functions  and  shade  out  the 
subordinate  executive,  but  to  use  this  surplus  talent  for 
attacking  the  most  important  difficulties  which  restrain 
growth,  so  that  with  the  increase  in  the  size  of  the  organ- 
ization there  will  come  abundance  of  the  proper  kind  of 
work. 

From  the  viewpoint  of  the  minor  official,  the  proper 
administrative  functions  means  dignifying  him  in  the 
eyes  of  those  over  whom  he  is  set.  Stimulus  comes  from 
the  opportunity  to  do  a  task  large  enough  to  arouse 
the  interest;  efficiency  comes  from  the  freedom  to  bring 
one's  personality  to  bear  in  a  manner  harmonious  with 
nature.  Well-scattered  responsibility  sobers  and  settles 
a  force  of  executives  and  develops  and  seasons  their 
talents;  for  individual  character  is  not  developed  by 
imaginary  responsibility,  but  by  actually  carrying  it. 

In  all  history  there  are  but  few  examples  of  armies 
that  have  done  great  things  without  the  presence  of  two 


1 

d 
i- 

re 

i- 


C) 


^T> 

BOARD  OF  DIRECTORS  AND    EXECUTIVE  COMMITTEE 


r 


TREASURER 

Mr  Emery 

+ 


PRESIDENT 

Mr  Gordon 
2 


COMPTROLLER 

Mr.  MoCresdy 

a 


V  VICE-PRESIDENT    ^ 


VICE-PRESIDENT 

Mr,  Normin 
3 


ASST  COMPTROLLER 

Mr,  Wilbor 

9 


\3: 


S^ 


PURCHAS(N6 

WORKS 

AGENT 

MANAGER 

Mr.   UosTer 

Mr.  Pr-»-t1- 

19 

a7 

r 


MASTER  MECHANK 

5+ 


SUPERINTENDENT 


6EN.r0REM»N 

Mr  H»Kn 
(Wood)       61 


^ 


r~ 


6EN. FOREMAN 
Mr  Clayton 

(Brass)     65 


SEN.  FOREMAN 
Mr.  West 

(Iron)        70 


^K, 


A^ 


GENERAL  MANAGER 

Mr.  Wright 
6 


n 


SECRETARY 

Mr.  Trier 
5 


ASST.QEN.MAMA5ER 

Mr,  Meriderh 


^ 


1 


/■       \  ■    "s ^ 

F0REI6M 

PARTS  » 

BRANCH 

ATOM-' 

Ounn 

str«M 

BUck 

Jatobs 

+1 

+E 

4-3 

44 

1       ^ 

PARTS* 

Wajrer 

Swifl 

47 

4S 

SHIPPINQ  CLERK 


(jEN. FOREMAN 


(B»tt«rits)    88 


LUfVlBtR 

CUTTINQ 

Smtlair 

Hunter 

62 

6B 

C0RE6 


MOULD 


CORES 


MOULD 


7 /            /-          N            \            % 

^ 

FDR6II(6 
(onnor 

79 

^"a^/l^e 

Wr 
80 

81 

A55EH- 
BLlNCi 

Welling 
&2 

PAINT 

Mr 
M'M>h.n 

8J 

VARNISH 

NorTon 

84 

TRIM 

85 

PLATE 

FORWIM 

A5SEM- 

ROOM 

Mr. 

erey 

FosTer 

firjtn 

89 

90 

91 

3 


FiQ,  4. — Chart  Illustrating  Line  Control  in  tbe  Automobile  Industry 


C 


Responsibility  31 

very  important  elements,  namely,  good  leadership  and 
good  discipline — the  capacity  of  men  for  following  lead- 
ership. There  have  been  many  instances  where  a  change 
of  leaders  has  transformed  an  unsuccessful  into  a  tri- 
umphant army,  and  incidentally  cases  where  the  reverse 
has  resulted.  Above  all  what  is  needed  for  efficient  pro- 
duction or  efficient  factory  accounting  is  leadership. 


CHAPTER  IV 

OllOANIZATION    CHARTS 

Making  Organization  Charts 

Tlie  aim  of  control  is  the  impelling  force.  We  may 
conceive  all  the  other  functions  of  production  fully 
organized  and  ready  to  begin  and  accounting  methods 
devised  and  the  staff  at  their  posts,  but  'Hhe  spark  of 
life,"  so  to  speak,  is  needed  to  set  them  at  work.  This 
thing  wanted  is  the  duly  authorized  order.  In  modem 
production  this  is  given  effect  through  a  more  or  less 
elaborate  organization,  whose  special  business  is  to 
attend  to  the  regular  and  systematic  issue,  dissection, 
and  distribution  of  orders. 

Material  and  equipment  being  perfectly  inert  require 
the  laying-on  of  human  hands  to  actuate  them.  In  prac- 
tice the  duties  of  such  persons  have  to  be  organized 
according  to  a  definite  plan,  so  that  each  has  certain 
specific  work  to  attend  to. 

The  complete  scope  and  the  detailed  operation  of  an 
organization  plan  is  not  easily  grasped  when  it  is  viewed 
as  a  whole.  For  a  just  conception  of  its  effects  and 
operations  the  various  responsibilities  must  be  clearly 
seen  and  the  relationship  of  one  official  to  another  and 
to  the  organization  in  its  entirety  be  positively  deter- 
mined. 

It  is  not  always  a  simple  matter  to  ''chart*'  an  organ- 
ization for  a  specific  factory^  pai-ticuiariy  where  intri- 

32 


Organization  Charts  33 

cate  conditions  obtain.  Different  conditions  exist  in 
every  different  plant  and  must  be  studied  before  a  plan 
can  be  evolved.  After  the  designer  of  the  chart  has 
informed  himself  as  to  the  ramifications  of  authority, 
he  will  undoubtedly  be  able  to  outline  roughly  a  chart 
which  will  meet  the  existing  conditions.  This  chart  will 
usually  require  considerable  adjusting  and  modifying 
before  it  can  meet  these  conditions  to  best  advantage. 
The  relationship  of  the  various  authorities  is  indicated. 
Each  duty  should  represent  a  definite  grade  of  quali- 
fication. Each  duty  should  be  precisely  defined,  so  that 
no  ambiguity  exists  as  to  its  range. 

When  the  draft  is  made,  the  course  of  procedure  is 
carefully  ''tracked"  from  start  to  finish,  such  addi- 
tions and  changes  as  seem  to  be  necessary  being  made 
in  the  chart.  When  this  is  done,  a  second  rough  drafting 
is  made,  possibly  showing  material  changes,  the  rela- 
tionship of  the  various  factors  being  modified  better 
to  meet  existing  conditions  in  the  light  of  coordination. 
Have  they  been  so  arranged  that  no  gap  or  overlap 
exists?  No  jurisdiction  should  overlap.  No  man  should 
be  expected  to  serve  two  masters,  if  possible  to  avoid  it. 
The  spheres  of  duty  must  exactly  join. 

Under  such  circumstances  the  value  of  a  chart  as  a 
clear  epitomized  presentation  of  the  whole  organization 
can  hardly  be  overestimated.  It  brings  out  the  practical 
working  of  the  organization  and  shows  any  defects  in  it 
as  hardly  anything  else  could. 

Frequently  four  or  five  charts  will  be  drawn  before 
a  satisfactory  one  is  devised. 

As  it  becomes  more  generally  realized  how  much 
depends  upon  the  method  of  presenting  facts  as  com- 
pared to  the  facts  themselves,  there  is  a  sharp  increase 


34  Factory  Accounting 

in  the  use  of  graphic  methods  of  presentation.  An 
organization  chart  is  an  excellent  example  of  the  division 
of  a  total  into  its  component  parts.  Such  a  chart  should 
be  devised  for  every  organization,  even  more  especially 
for  those  organizations  which  are  shorthanded  and  are 
expanding  the  business  by  having  one  man  hold  the 
authority  of  several  positions.  It  should  be  graphically 
shown  what,  if  any,  positions  are  but  temporarily  filled, 
in  order  that  there  need  be  no  irritation  or  ill-feeling  on 
the  part  of  some  that  authority  has  been  usurped.  If 
such  a  chart  is  employed,  there  will  be  fewer  cases  of 
pique  and  less  short-circuiting  of  orders. 

Authority  reaches  down  through  the  several  branches 
of  an  organization  in  various  ways.  If  a  chart  be  prop- 
erly planned,  there  can  be  no  doubt  as  to  the  status  of 
individuals  with  relation  to  those  in  authority.  No  two 
factory  organizations  are  composed  exactly  alike.  There 
may  be  some  resemblance,  in  skeleton  form,  in  all  com- 
pletely and  successfully  organized  businesses.  Very  few 
enterprises  are  organized  along  exactly  the  proper  lines, 
which  is  the  one  most  prominent  reason  why  there  is 
such  inefficiency  in  industry. 

"We  know  that  the  true  correlation  of  functions  is 
with  the  Loss  and  Gain  Account  of  the  business.  It  is, 
of  course,  true  that  successive  functions  must  be  corre- 
lated with  each  other,  that  a  single  department  must  be 
self-correlated,  that  all  departments  must  be  correlated 
with  each  other,  but,  after  all,  the  Loss  and  Gain  Account 
is  the  center  with  which  each  function,  force,  and  depart- 
ment must  be  correlated.  It  is  not  difficult  for  us  to 
recognize  success  as  the  center  of  correlation. 

A  forceful  depiction  of  the  niceties  of  adjustment  nec- 
essary in  a  producing  enterprise  is  one  used  by  a  large 


35 

is- 
les 
3e- 
is- 
im 
In 

!§', 
ds 


rt- 

he 
lis 
its 
ch 

2), 
nt 
he 
it 
ed 
^e. 
ce 
ce 
is- 
er 


er 
ns 
es 
ae 
he 


KEY  TO  CONSULTING  HEADS 


GENERAL  CONSULTATION 


J^^ 


->  EXECUTIVE  CQMMITTEe 


I  SlAUaHTCRING  CONTB^CTS 


SALES  CONSULTATION   1 
FfEPORTSOFDtPT.    HEADs| 
PROMOTION  EMPLOYEES    I 
SPECIAL     CL/^IMS 


Seo,  F.  Emery 
RobTS. Emery 
Wm.  Gordon 
Stanley  Bowe 
Franklin  Wright 


LesTtrPratr 
John  Harold 

FranKt  Webner 


Fia.  S.— Chart  Illustrating  Functional  Control  in  the  Meat-Packing  Industry 


Organization  Charts  35 

corporation  of  international  fame  in  its  Hall  of  Indus- 
trial Education,  and  above  it  the  words,  *' Success  comes 
from  team  play. ' '  Figure  3  is  what  is  called  a  ' '  three- 
horse  hitch,"  a  whippletree  adjusted  for  the  even  dis- 
tribution of  pull  for  three  horses.  This  shows  the  team 
play  necessaiy  for  the  success  of  the  organization.  In 
order  for  all  to  succeed,  it  is  necessary  for  the  making, 
selling,  and  recording  divisions  to  pull  together  towards 
a  common  destination — profit. 

Chaeting  Line  Contkol 

Figure  4  is  a  chart  showing  a  full  and  complete  depart- 
mental organization  illustrating  line  control  in  the 
automobile  industry.  Under  the  ramifications  of  this 
chart  we  see  that  the  board  of  directors,  through  its 
executive  committee  (1)  evolves  certain  policies  which 
are  in  whole  or  in  part  passed  on  to  the  president  (2), 
the  treasurer  (4),  and  the  secretary  (5).  The  president 
(2)  has  close  relations  with  the  \ace-president  (3),  the 
treasurer  (4),  and  the  secretary  (5).  In  this  chart  it 
appears  that  the  vice-president  (3)  has  no  clearly  defined 
duties  other  than  that  of  an  associate  chief  executive. 
In  practice  it  is  most  common  for  the  corporate  office 
of  vice-president  to  be  linked  with  the  functional  office 
of  treasurer,  secretary,  or  general  manager.  The  treas- 
urer (4)  has  concurrent  authority  over  the  comptroller 
(8),  upon  whom  devolves  the  direct  guidance  of  all 
recording  and  accounting  elements  of  the  enterprise. 

At  this  point  it  will  be  noticed  that  the  comptroller 
is  responsible  not  only  for  whatever  accounting  systems 
are  devised,  but  also  for  all  methods  and  responsibilities 
having  to  do  with  properties  and  stores  up  to  the  time 
they  are  delivered  to  the  factory  for  processing.     The 


36 


Factory  Accounting 


\    EXECUTIVE     A  COMMtTTEE^ 


Orders. ..„,.. 

CostCards 

Miteri&l- , .._ 

Pirtiallv  Fimshad 

Finished  Parts 

Finished  Produtt 


^)Cwipl«i;.{On<tr  y^ 


Fi6.  6.— Chart  Illustrating  the  Routine  of  an  Order  for  Crowding  Engines  in 
a  Steam  Shovel  Works 


Organization  Charts  37 

comptroller  is  the  custodian  of  the  company's  pi>»perty, 
while  the  general  manager  (6)  is  the  manipulator  of  the 
assets  for  the  purpose  of  creating  profits.  Fundamen- 
tally the  general  manager  should  assume  responsibility 
for  the  kind  and  quality  of  product  to  be  manufactured, 
•and  through  the  general  sales  manager  (38)  the  disposi- 
tion of  these  items  of  manufacture. 

The  general  manager  is  responsible  for  all  expendi- 
tures of  the  business  under  his  control  such  as  involved 
in  the  use  of  material,  labor,  ^nd  factory  overhead,  as 
well  as  commercial  costs.  He  is  responsible  for  improve- 
ments, extensions,  and  betterments. 

The  works  manager  (27)  has  jurisdiction  over  the 
direct  and  indirect  production  departments  (through  54, 
61,  64,  75,  and  88)  and  concurrent  jurisdiction  in  certain 
phases  of  the  work  of  the  factory  accountant  (49). 

This  type  of  chart  as  at  present  shown  is  not  altogether 
clear  at  certain  points  without  supporting  qualifications. 
As  for  instance  at  20,  49,  and  92,  there  might  appear  to 
be  an  overlap  of  authority  not  existing  in  fact. 

This  might  be  remedied  by  explaining  in  terse  tabular 
form  as  follows: 

(1)  At  20  (stores  and  stocks),  the  jurisdiction  of  the 
works  manager  (27)  covers  only  the  needs  of  certain 
materials  desired  at  specified  times,  while  that  of  the 
purchasing  agent  (19)  covers  the  supply  of  such  needs 
and  the  strict  accountability  for  what  remains. 

(2)  At  49  (factory  accountant)  the  jurisdiction  of  the 
works  manager  (27)  covers  only  the  channels  of  infor- 
mation concerning  the  uses  of  material,  labor,  and 
expense  in  the  plant,  while  that  of  the  assistant  comp- 
troller (9)  covers  the  comprehensive  tabulation  of  fac- 
tory   operations  and    the    articulation    of    the    factory 


38  Factory  Accounting 

accounts  with  the  general  financial  books.  (The  domina- 
tion of  49  [factory  accountant]  by  27  [works  manager] 
would  make  discolored  reflections  of  production  costs 
possible.) 

(3)  At  92  (shipping  clerk),  the  jurisdiction  of  the 
order  clerk  (45)  involves  only  the  shipping  instructions, 
while  that  of  the  works  manager  (27)  covers  the  supply- 
ing of  goods,  the  means  for  packing  same,  and  the  facili- 
ties for  conveying  to  the  transportation  media.  (There 
are  many  instances,  however,  where  the  functions  under 
the  works  manager's  jurisdiction  cease  with  the  delivery 
of  goods  to  the  floor  of  the  shipping  room.) 

Chaeting  Functional  Control 

Figure  5  is  a  chart  showing  functional  control  as 
applied  to  the  packing  industry.  In  the  present  chart 
it  will  be  seen  that  numerous  instances  occur  where  one 
person  holds  two  or  more  distinct  capacities.  This  chart 
was  chosen  purposely  that  the  student  may  acquire  a 
wider  range  of  knowledge  as  to  actual  conditions  in 
plants  of  other  than  maximum  volume,  which  are  far 
too  often  chosen  as  examples,  thus  giving  the  student 
exaggerated  ideas  of  small  plants. 

The  present  chart  is  somewhat  differently  designed 
from  the  foregoing  one.  There  are  no  hard  and  fast 
draughting  rules  in  this  connection,  and  charts  of  this 
character  are  quite  usually  the  result  of  individual 
artistic  conceptions  and  adjustments  rather  than  studied 
adherence  to  distinctive  types  of  devices. 

In  scrutinizing  the  source  of  authority  in  this  chart 
it  is  at  once  apparent  that  the  president  and  treasurer 
(1)  dominates  the  executive  committee  (2),  which  is  in 


Organization  Charts  39 

fact  an  advisory  cabinet.  It  shows  also  that  the  general 
manager  (3)  is  a  power  in  shaping  the  policies  of  the 
concern,  leaning  to  some  extent  npon  the  recommenda- 
tion  of  the  executive  committee,  but  perhaps  exercising 
his  own  judgment  as  to  the  enactment  of  laws  based 
squarely  on  the  committee's  findings.  This  is  approxi- 
mately as  near  as  can  be  attained  to  an  exact  pictorial 
reflection  where  the  powers  that  be  are  predominating 
stockholders  but,  nevertheless,  aim  to  be  guided  by  intel- 
ligent advice  from  specially  trained  minds. 

From  the  general  manager  (3)  radiates  authority  to 
the  sales  manager  (4),  the  superintendent  (5),  the  pur- 
chasing (7),  order  and  shipping  (8),  credit  and  collec- 
tion (9),  accounting  (10),  and  mechanical  and  inspection 
(11)  departments.  From  these  various  officials  radiates 
authority  to  subordinate  officials  or  functional  heads. 
Under  each  of  these  officials  and  their  subordinates  is 
shown  a  chart  of  operative  functions  or  activities. 
These  functional  heads  are,  in  the  chart,  referred  to  as 
*' consulting  heads";  they  deal  directly  with  the  men  in 
the  ranks  giving  advice  and  instruction.  In  many 
instances  functional  heads  are  not  invested  with  fullest 
power,  in  which  case  the  higher  authority  is  designated 
by  the  number  of  the  consulting  head,  a  key  to  which 
is  to  be  found  in  the  upper  left-hand  comer  of  the  chart. 

Chakting  the  Routine  of  an  Okdee 

In  its  usual  fonn  the  production  order  is  a  formal 
written  direction  or  authorization  for  product  to  be  put 
in  process ;  or,  applied  to  nonproductive  work,  it  is  the 
direct  or  standing  order  for  such  work  to  be  done.  As  a 
broad   rule,   no    factory   work,   whether   productive    or 


40  Factory  Accounting 

otherwise,  should  be  begun  unless  covered  by  a  specific 
order.  In  the  case  of  frequently  recurring  duties  of  a 
nonproductive  nature,  such  as  cleaning  out  tanks,  oiling 
machinery,  making  small  repairs,  etc.,  standing  orders 
are  usually  issued,  and  all  work  done  under  such  stand- 
ing orders  is  charged  to  the  particular  order  number  to 
which  it  belongs. 

The  first  step  in  the  manufacture  of  an  article  or 
product  under  a  modem  factory  accounting  plan  is, 
then,  the  issuance  of  a  production  or  assembling  order, 
as  the  case  may  be,  which  is  a  general  authorization  to 
those  concerned  to  proceed  with  the  manufacture  indi- 
cated. This  they  do  in  accordance  with  the  formalities 
and  routine  of  the  particular  factory. 

There  is  no  generally  observed  rule  as  to  the  official 
by  whom  the  production  order  is  issued.  Nor  is  there 
any  general  uniformity  of  practice.  Every  factory  is  a 
law  unto  itself,  and  its  production  order  is  issued  by 
such  official,  or  officials,  or  in  such  manner  as  seems  best 
to  its  management. 

Similarly  there  is  no  standard  form,  every  factory 
adopting  such  shape  and  arrangement  of  production 
order  as  fits  in  best  with  its  own  requirements.  Indeed, 
as  a  matter  of  practice,  some  lines  of  production  issue  no 
formal  written  orders  at  all,  and  there  are  circumstances 
under  which  written  orders  would  be  of  no  particular 
advantage.  Thus,  where  the  production  is  standard  and 
continuous,  the  product  may  be  turned  out  day  after 
day  under  a  standing  order  or  with  no  production  order 
at  all.  At  other  times  production  is  begun  on  a  verbal 
order  from  someone  in  authority,  with  perhaps  a  scale 
ticket  or  sheet  showing  each  lot  number  with  weights 
or  inspection  tallies,  or  other  analogous  record  to  serve 


Organization  Charts 

as  an  identification.  This  class  of  production  is  illus- 
trated by  packing  houses  mth  their  ''bunches"  of  live 
stock  and  by  sawmills  with  their  ''jags"  of  logs. 

In  its  simplest  form  the  production  order  is  merely 
a  direct  request,  order,  or  authorization  to  the  proper 
party  to  begin  a  specified  production.  In  its  usual  form 
the  production  order  goes  beyond  this,  giving  various 
details  as  to  the  products  frequently  combined  with  a 
requisition  for  material.  To  this  are  frequently  added 
blanks  for  information  concerning  the  progress  and  the 
details  of  production,  so  that  when  the  operation  is 
finished,  the  production  order  itself  shows  a  more  or  less 
complete  record  of  the  whole  operation. 

Thus  in  the  manufacture  of  shoes  specific  orders  are 
put  into  process  with  a  "tag"  to  accompany  each 
"case."  This  tag  is  in  itself  the  production  order,  but 
also  bears  the  relevant  data  concerning  production 
details  and  follows  the  goods  from  start  to  finish,  serv- 
ing in  this  way  as  a  job  follower.  In  the  more  effi- 
cient shoe  factories,  w^hat  is  known  as  the  "sheet"  sys- 
tem or  ' '  schedule ' '  plan  is  used  to  put  the  lots  under  the 
different  tags  in  work  in  carefully  arranged  daily 
groups,  moving  through  the  factory  on  a  prearranged 
schedule  so  that  there  will  be  no  localized  congestion 
nor  interference  between  the  various  specific  orders, 
while  at  the  same  time  the  full  capacity  of  the  plant  is 
utilized. 

The  schedule  plan  is  not  peculiar  to  shoes  but  can  be 
used  with  any  product  of  a  fixed  process  nature.  Furni- 
ture, soap,  iron  safes,  etc.,  are  examples  of  such  product. 
The  prearrangement  of  work  involved,  with  the  subse- 
quent pressure  on  all  sides,  to  keep  production  up  to  the 
schedule  time  is  very  advantageous.     This  has  come  to 


42  Factory  Accounting 

be  recognized  as  an  important  feature  of  efficient  man- 
agement. 

Wliere  various  articles  are  being  simultaneously  pro- 
duced, something  more  accurate  than  practical  instinct 
is  desirable  as  a  guide.  In  a  very  small  undertaking  this 
practical  instinct  may  be  sufficient,  but  we  are  not  con- 
sidering the  case  of  very  small  undertakings.  The 
moment  the  work  gets  too  large  in  volume  for  all  its 
minute  details  to  be  carried  in  one  head,  the  necessity 
for  a  close  analysis  and  system  of  reports  and  records 
becomes  marked.  The  elements  which  enter  into  the 
handling  of  an  order  from  start  to  finish  are  many. 

Chakt   Details 

Figure  6  is  a  chart  showing  the  channels  through 
which  orders  and  responsibilities  are  passed  along  in 
the  making  of  a  given  quantity  of  crowding  engines 
for  a  steam  shovel  of  a  standard  type.  There  is  also 
shown  the  paths  of  travel  of  material,  partially  finished, 
and  finished  parts,  also  the  record  cards  for  material 
and  labor. 

The  present  chart  represents  line  control  partially 
under  old  school  conditions,  but  with  a  few  features  of 
modem  industrial  management  injected,  as  for  instance, 
a  modern  cost-finding  plan  and  a  planning  department. 
However,  this  example  is  intended  more  to  create  a  mind 
picture  of  recording  and  accounting  relationship  than 
the  exact  course  of  deputation,  although  it  can  do  both. 

The  need  of  products  of  certain  kinds  usually  is  made 
known  by  the  sales  department,  and  in  the  present 
chart  the  order  emanated  from  the  executive  committee 
(A)  to  the  works  majiager  (B).    Foundry  and  machine 


Organization  Charts  43 

shop  work  comes  under  the  jurisdiction  of  the  general 
superintendent  (C)  and  through  him  to  his  clerical 
force,  orders  being  issued  by  his  clerks  (E),  while 
all  forgings  are  under  the  forge  department  super- 
intendent (D),  orders  being  issued  by  his  clerks  (F). 
The  iron  foundry  (G),  the  steel  foundry  (H),  and 
the  forge  shop  (I)  supply  what  becomes  known  as 
"parts,"  being  made  in  quantities  usually  larger  than 
for  immediate  needs,  particularly  if  such  parts  are 
standard.  These  manufactured  parts  are  put  into  what 
is  called  ''stock,"  as  distinguished  from  ''stores"  of  raw 
material.  The  stores  and  stocks  department  is  repre- 
sented on  this  chart  by  both  incoming  and  outgoing  mate- 
rial. Receipts  of  raw  material  (J)  includes  purchases 
specifically  authorized  by  the  works  manager  (B)  and 
receipts  of  parts  (K)  the  product  of  factory  depart- 
ments G,  H,  I,  M,  N,  0,  and  T.  All  issuances  of  both 
stores  and  stocks  are  represented  by  one  circle  (P). 
(The  arrows  30  and  31  merely  "close  the  circuit" 
between  receipts  and  issuances  of  stores  and  stocks.) 

The  route  manager  (L)  has  the  planning  of  work  for 
the  east  (M),  west  (N),  and  north  (0)  machine  shops 
and  the  drill  (T)  and  the  templet  (U)  departments.  The 
vise  (S)  and  the  engine  test  (R)  departments  receive 
orders  directly  from  the  general  superintendent's 
department  (C). 

The  key  at  the  lower  right-hand  corner  shows  the  exact 
meaning  of  the  various  indicated  lines  in  the  chart. 
Arrow  1  represents  the  authority  of  the  executive  com- 
mittee (A)  given  to  the  works  manager  (B).  Arrows 
2  and  4  represent  authority  passed  on  to  the  superin- 
tendents (C  and  D  respectively).  Arrow  3  represents 
authority  given  for  the  purchase  of  certain  raw  mate- 
rials  (J).     Arrows  5  and  6  represent  the  instructions 


44  Factory  Accounting 

given  the  clerical  forces  (E  and  F)  for  the  issuance  of 
certain  formal  orders. 

Arrows  7  represent  orders  given  to  the  foundries 
(G  and  H)  for  necessary  castings.  Arrow  8  represents 
orders  given  for  all  necessary  forgings.  Arrow  9  repre- 
sents orders  for  machining  of  any  nature  or  kind. 

Arrows  10  represent  raw  materials  drawn  from  stores 
(P)  by  G,  H,  and  I. 

Arrows  11  and  12  represent  time  records  of  labor 
consumed  and  requisitions  or  reports  of  materials  used 
by  G,  H,  and  I. 

Arrow  13  represents  rough  castings  from  foundries 
G  and  H  passed  to  stocks  (K).  Arrow  14  represents 
forgings  from  forge  shop  (I)  to  stocks  (K). 

Arrows  15  represent  the  allotment  of  orders  to  the 
three  machine  shops  (M,  N,  and  0). 

Arrows  16  represent  the  transfer  of  rough  castings 
from  stocks  (P)  to  the  three  machine  shops  (M,  N,  and 
0). 

Arrows  17  represent  the  transfer  of  material  stores 
(P)  to  the  three  machine  shops  (M,  N,  and  0)  and  the 
vise  department  (S). 

Arrows  18  represent  partially  completed  work  passing 
from  the  max?hine  shops  (M,  N,  and  0)  to  the  drill 
department  (T).  Arrow  19  represents  similar  work 
which  has  first  to  go  to  the  templet  department  (U)  and 
Arrow  20,  where  it,  in  turn,  passes  to  the  drill  depart- 
ment (T).  Arrow  21  represents  where  the  parts  in  the 
drill  departments  (T)  finally  pass  as  finished  parts  to 
the  stockroom  (K). 

Arrow  22  represents  time  and  material  records  from 
the  three  machine  shops   (M,  N,  and  0)   and  the  time 


Organization  Charts  45 

and  material  contributed  to  the  production  of  parts  by 
the  vise  (S)  drill  (T)  and  templet  (U)  departments. 

Arrows  23,  24,  and  25  represent  finished  parts  trans- 
ferred to  stocks  (K)  from  the  three  machine  shops  (M, 
N,  and  0). 

Arrows  26  represent  an  assembling  or  completing 
order;  Arrow  27  represents  the  transfer  of  parts  from 
stock  (P)  to  be  assembled  in  vise  department  (S). 
Arrow  28  represents  the  finished  engines  transferred 
to  the  testing  department  and  finally  to  Area  29,  repre- 
senting the  finished  stockroom. 

Arrow  30  represents  merely  the  connecting  link 
between  the  receipt  of  raw  material  in  the  storeroom  (J) 
and  the  point  of  its  issuance  on  requisitions  (P).  In  lik<e 
manner  Arrow  31  represents  the  flow  of  finished  or 
semifinished  parts  from  stockroom  (K)  to  the  point  of 
issue  (P). 


f>ART  TWO— CONTROLLING  RECORDS 
CHAPTER  V 

CONTRCLIiING  ACCOUNTS 

DEriNiTioN  OF  Controlling  Accounts 

A  controlling  account  is  one  supported  by  analytical 

or  subsidiary  accounts.     It  presents  in  totals,  synthet- 

cally,  what  is  presented  in  the  analytical  accounts  or 

records  in  detail,  showing  explicitly  the  net  results  of 

the  total  debits  and  credits  to  the  subsidiary  accounts. 

Thus  a  single  Material  Account  in  the  General  Ledger 
or  the  Private  Ledger  may  show  the  aggregate  debits 
and  credits  of  three  thousand  or  more  individual 
accounts  with  various  kinds  of  material,  these  latter 
appearing  in  detail  in  a  subsidiary  Stores  Ledger.  The 
totals  of  these  subsidiary  accounts  must,  of  course,  agree 
with  the  totals  of  the  main  or  ''controlling"  account. 
When  this  is  so,  the  accounts  are  said  to  be  in  articula- 
tion. Though  of  almost  elementary  simplicity  and  of 
obvious  advantage,  the  intentional  and  intelligent  use 
of  the  controlling  account  is  comparatively  modern. 

Inasmuch  as  the  establishment  of  ledger  controls  has 
resulted  from  the  evolution  of  the  Journal,  and  for 
the  further  reason  that  the  whole  theory  of  controlling 
accounts  rests  more  upon  a  question  of  mechanism  of 
books  than  upon  a  question  of  principles,  it  may  be 

46 


Controlling  Accounts  41 

well  to  make  the  controlling  accounts  serve  as  a  connect- 
ing link  between  the  theory  of  the  books  and  the  gen- 
eral classification  of  the  accounts  which  the  books 
contain. 

Controlling  accounts  are  positively  necessary  in  mod- 
em f actoiy  accounting,  as  the  factory  accounts  should,  as 
a  matter  of  course,  articulate  with  the  general  financial 
books  of  the  concern.  When  this  is  done,  an  independ- 
ent and  complete  balance  sheet  and  profit  and  loss  state- 
ment may  be  made  up  each  month  from  the  General 
Ledger  or  its  equivalent  without  recourse  to  the  sub- 
sidiary records.  If  the  General  Ledger  proof  of  post- 
ings is  correct,  the  balance  of  the  controlling  account 
must  also  be  correct.  Then,  if  the  sum  total  of  the  bal- 
ances taken  from  the  subsidiary  ledger,  or  ledgers,  as  the 
case  may  be,  does  not  articulate  with  the  balance  of  the 
controlling  account,  the  error,  or  errors,  will  be  found  in 
the  subsidiary  records.  ^ 

Before  the  advent  of  the  columnar  journal  with  its 
division  into  integral  parts,  it  was  possible,  for  bal- 
ance sheet  pui*poses,  to  obtain  the  net  amount  due  from 
customers,  even  though  the  General  Ledger  was  not 
entirely  posted  or  was  out  of  balance.  An  analysis  of 
the  Journal,  if  accurately  made,  would  give  the  sales,  the 
returned  sales,  and  allowances,  as  well  as  the  settle- 
ments made  by  customers.  But  the  process  was  lengthy 
and  the  delay  irksome.  The  demand  became  insistent 
for  timely  information  concerning  financial  facts. 

The  analytical  results  given  by  the  books  of  original 
entry,  which  were  subsequently  built  up  from  the 
Journal,  made  it  possible  to  obtain  not  only  the  minutest 
detail  of  every  transaction,  but,  as  well,  periodical  totals 
of  broad  classes  of  facts.    All  financial  books  are  either 


48 


Factory  Accounting 


4)    tc 


3 

3 

5 

cu 

C 

G< 

(h 

^ 

t;*» 

3-n 

o 

6Q  C 
1-^ 

l-H 

Q 

o  • 

1 

*3 

o 

3 

•  •-4 

;3  h 

bo 

SH 

it 

^ 

e5 

o  ^ 

o 

Y 

(/J 

^ 

-i:> 

•II 

f 

5  » 

t- 

g^. 

• 

ContrGlllng  Accounts  49 

Journals  or  Ledgers  in  effect  and,  in  a  well-constnicted 
plan  of  modern  production  accounting,  the  factory 
records  come  well  within  the  category  of  financial 
books. 

Cost  records  which  are  not  capable  of  being  recon- 
ciled or  agreed  with  the  actual  results  sho\\Ti  by  the 
controlling  financial  books,  are  practically  valueless, 
inasmuch  as  there  can  be  no  assurance  even  of  their 
approximate  accuracy. 

Beyond  this,  by  means  of  controlling  accounts  the 
representative  accounts  of  an  extensive  plant  may  be 
brought  within  the  compass  of  a  single  ledger,  and  these 
accounts  may,  if  desired,  be  still  further  condensed  into 
one  small  Private  Ledger,  which  will  then  show  the 
essential  facts  and  conditions  of  an  entire  plant. 

The  controlling  accounts  of  a  business  should  show 
a  gi'aphic  reflection  of  its  operations  and  the  condi- 
tions of  its  various  financial  phases  from  the  purchase 
of  raw  material  to  the  division  of  profits.  In  order  to  do 
this  successfully,  there  must  be  a  most  carefully  classi- 
fied system  of  records,  and  the  focused  results  of  these 
records  must  be  embodied  in  one  book  to  which  all  other 
books  and  records  in  the  plan  are  subsidiary. 

As  books  of  original  entry  are  cut  up  or  segregated 
into  the  component  parts,  so  should  be  the  book  of  final 
entry  in  which  results  are  reflected.  This  is  mechani- 
cally accomplished  by  guide  sheets  planned  according 
to  the  requirements  of  the  individual  business,  placing 
each  group  of  accounts  in  properly  arranged  sequence. 

The  relationship  and  proper  classification  of  the  vari- 
ous accounts  of  a  manufacturing  business  are  illustrated 
by  the  chart  shown  in  Figure  7.  Accounts  peculiar  to 
particular  lines  of  production  are  not  included.     This 


50 


Factory  Accounting 


mmmma^:-  ^sT^Tiiwrmm^mM^mtm, 


f 

i 

rt- 

•if 

til 
i|in 

\% 

■M-444- 


® 

PURCHASES 


» ^ 


© 
STORES 
.STOCKS 


PAY  ROLL 


— (T-, 


1  'I ' 


LABOR 
DISTRIBUTION 


< 


® 

EXPENSE 
DISTRIBUTION 


II',;'  TABULATING        J|[ 


T'it' 
ii.u4 


MATERIAL 


m 

LABOR  TIME 
■WAND'GUr 


0 

ELMSEDTTMECARD 


® 

DEPARTMEmTI 
EXPENSE  RATI 


®i 


MECHANICAL    AIDS 
ASSORTING 
LISTING     (g) 


t 


Fig.  8. — Chart  Showing  the  Routine  Controlling  Entries 


Controlling  Accounts  51 

chart  is  intended  merely  to  show  the  general  relations 
which  certain  classes  of  accounts  bear  to  the  business  as 
a  whole  or  to  other  classes  of  accounts  of  the  same  busi- 
ness.    A  more  complete  chart  is  shown  in  Figure  9 


Routine   of   Conteolling  Entries 

It  must  always  be  borne  in  mind  that  forms  in  them- 
selves, no  matter  how  well  adapted  to  their  special  pur- 
poses, do  not  constitute  an  accounting  system  but  are 
merely  a  means  of  recording,  exhibiting,  and  preserving 
the  operations  of  the  system. 

The  forms  referred  to  in  chapters  following  have  each 
in  themselves  points  of  value,  but  in  order  to  be  of  the 
greatest  value  in  any  system  of  factory  accounting,  they 
must  intermesh  or  harmonize  with  the  other  records  in 
such  manner  as  to  form  a  complete  and  smoothly  work- 
ing system. 

A  chart  and  the  right  use  of  the  imagination  enable 
one  to  keep  in  mind  an  image  or  picture  of  the  whole 
field  to  be  covered,  so  that  no  one  part  will  be  overlooked 
while  the  attention  is  concentrated  on  some  other  parts. 
This  is  especially  important  to  the  person  who  is  devis- 
ing a  complete  system  of  financial  and  factory  cost 
accounts,  so  that  each  point  will  be  covered  with  due 
reference  to  every  other  point  and  all  the  several  units 
will  so  dovetail  that  the  results  will  constitute  a  con- 
sistent and  harmonious  whole. 

The  chart  shown  in  Figure  8  presents  in  diagrammatic 
form  the  books  and  records  used  in  a  system  of  factory 
accounting  which  is  embodied  in  the  general  financial 
records.     These  are  so  arranged  and  connected  as  to 


52  Factory  Accounting 

show  the  functions  of  each,  the  course  of  entries  from 
one  to  another,  and  the  general  relation  each  bears  to  the 
others  and  to  the  system  as  a  whole. 

In  the  chart  as  presented,  the  numbered  arrows  indi- 
cate the  course  of  entries  from  one  record  to  another, 
while  the  various  records  and  forms  are  represented 
by  *' boxes"  or  rectangular  outlines.  Any  other  dis- 
tinctive form  would  have  done  as  well,  the  squares 
having  been  selected  as  a  mere  matter  of  personal  pref- 
erence and  because  they  conveniently  fit  the  available 
space.  The  location  of  the  various  forms  on  the  chart 
was  controlled  to  some  extent  by  the  necessary  course 
of  the  arrows  which  indicate  entries. 

The  shaded  central  portion  of  the  chart  (A)  repre- 
sents the  synthetical  or  controlling  records  or  accounts, 
preferably  kept  in  a  book  called  the  ' '  General  Exhibit, ' ' 
though  with  considerably  less  convenience  they  may  be 
kept  in  a  General  Ledger  under  old-fashioned  posting 
routine.  The  arrows  indicating  the  course  of  entries 
passing  through  this  shaded  portion  indicate  that  cor- 
responding entries  are  made  in  a  controlling  account. 
The  entry  will  be  ''under  control"  for  the  reason  that 
the  totals  of  all  balances  of  the  particular  month  in  all 
the  various  debit  and  credit  columns  of  the  analytical 
records  must  exactly  articulate  with  the  corresponding 
column  in  the  General  Exhibit.  If  any  item  has  been 
lost  in  posting,  the  omission  will  be  at  once  discovered 
on  comparing  the  totals  of  the  corresponding  columns 
of  the  General  Exhibit  and  the  analytical  records. 

The  following  tabulation  takes  up  in  order  the  books 
and  records  shown  on  the  chart.  The  figure  number 
references  after  each  show  where  forms  of  the  character 
indicated  may  be  found  in  the  present  volume.    The  page 


o 


FACTORY  ACCOUNTING  by  WEBNER 


Complete  Chart  of  Accounts 

Debit  Accounts  and  Numbers  are  in  Blue. 
Credit  Accounts  and  Numbers  are  in  Red. 


CAPITALS  indicate  that  synthetical  or  control- 
ing  accounts  are  to  be  kept  as  explained  in  Chap- 
ter V,  preferably  on  a  Oenera.!  Exhibit  similar  to 
Figures  11,  12,  and  15. 

•Indicates  that  an  analytical  ledger  or  record  is 
to  be  kept  either  in  a  separate  book  or  binder  or 
merely  on  a  subdivision  with  other  records. 


Thifl  and  any  of  the  other  charts  caji  easily  be 
removed  from  the  book  and  mounted  on  muslin 
for  preserration  in  frequent  handling. 


ANY  ORDINARY 

MANUFACTUSDfO 

PROPOSITION 


|b  "'^si^r 
c  '•fo'^r 

D  ^"'S^' 


■|50-SI    CITY  CUS-^' 
100-81    COUNTRY 


T4-'7o    Factory  Material 


Incoming  Frcigbt.  Exprw. 
VariatioD  oV  Weights  and 


H 


H08-J^     Shafting.  Hangp 


'  13H.31S    S.' 


I  P«ed^, 

T  Sepresentativef      i 

j(  Deferred  Charges  , 

"L   Bondedt  isoO'SOI     First  Mortgage  BondB 

\|  Floating  /lia^sia    ACCOUNTS  payable* 

SIO'SII  IJ14.6IS    ACCRUED  LABOR* 


p^  Deferred  Credits 


Q  Capitalt 


'■^     Prelght.  EsprMt,  and  Dra>Bgc  Outbouni 


lY  '•Kootcri 


Controlling  Accounts  53 

references  after  each  show  where  these  records  or  forms 
are  discussed  in  the  text. 


(A)  General  Exhibit:  Figures  11  to  15;  generally,  Chap- 
ters VI- VIII. 

(B)  Purchase  Analysis:  Figures  18,  19;  pages  105,  111, 
141-142,  146,  247,  259.' 

(C)  Stores  and  Stocks  Records:  Figures  11,  12,  15,  32 
pages  75,  88,  297 ;  and,  generally.  Chapter  XV. 

(D)  Pay  Eoll:     Figures  81,  82;  generally,  Chapter  XVI. 

(E)  Labor  Distribution:  Figures  %^,  69,  80,  82;  generally 
Chapter  XVI. 

(F)  Expense  Distribution:  Figures  83,  84;  pages  108-109 
and,  generally.  Chapter  XVIII. 

(G)  Material:  Figures  1,  11,  12,  15,  19,  20,  41  to  50;  gener 
ally,  Chapter  XV. 

(H)  Labor  Time  "over  all":  Figures  1,  52,  53,  55,  56,  64 
65,  72,  73 ;  pages  8-9 ;  and,  generally,  Chapter  XVI. 

(I)  Labor  Time  "on  jobs":  Figures  52  to  80;  page  8;  and 
generally.  Chapter  XVI. 

(J)  Departmental  Overhead:  Figures  1,  83,  84;  pages  7,  8 
303-304;  and,  generally.  Chapter  X^^II. 

(K)  Analytical  Compilations  (mechanical  aids)  :  Figures  36 
37,  47,  68,  69,  80,  81 ;  pages  97,  99,  102-103,  108,  145,  173,  254-263 
283-287. 

(L)  Statistics :  Figures  14,  23  to  29,  35  to  37,  68,  69 ;  pages  87 
99,  100,  103-104,  107,  164,  173,  199,  253-263,  283-288. 

(M)  Production  Register:  Figures  20,  23  to  28;  pages  107 
164-165,  198. 

(N)   Sales  Analysis:  pages  11,  12,  18,  87,  95,  102-105. 

(0)  Private  Ledger:  pages  46-49,  77,  82,  102,  115,  143-144, 

(P)   Customers  Accounts:  pages  73,  89,  102-103. 

(Q)  Cash  Receipts:  Figure  16;  page  122;  and,  generally 
Chapter  IX. 

(R)  Check  Register:  Figure  17;  pages  133,  142-146;  and 
generally,  Chapter  IV. 


54  Pactory  Accounting 

The  following  tabulation  has  reference  to  the  num- 
bered arrows  in  Figure  8.  These  arrows  indicate  rela- 
tionships of  entries,  where  entries  are  made. 

(1)  The  tabulation  of  purchases  by  material  classifications, 
departments,  etc.:  Figures  12  (line  9),  19,  32,  34;  pages  105, 
111,  143-145,  247-248. 

(2)  (a)  Purchases  of  equipment  posted  to  controlling 
accounts:    Figure  12  (lines  9,  11)  ;  pages  107,  111,  143. 

(b)  Totals  of  various  classifications  of  purchases  posted  to 
controlling  accounts:  Figure  12  (lines  6,  9,  11,  16,  19,  20); 
pages  107,  143. 

(3)  The  posting  of  material  purchases  to  the  "going  inven- 
tory" record:    Figure  32;  pages  148,  241,  244-247. 

(4)  Items  purchased  that  properly  are  chargeable  to  expense 
classifications :  pages  7,  325. 

(5)  (a)  Uses  for  material  and  supplies  for  expense  purposes 
about  the  plant  when  not  handled  through  the  Production 
Kegister:    Figures  12  (line  28),  37,  47;  page  96. 

(b)  Adjustments  that  may  be  made  necessary  by  disagree- 
ment between  the  actual  inventory  total  at  a  given  date  and 
its  corresponding  Stores  Ledger  Account,  chargeable  to  expense 
if  there  be  no  reserve  set  up  for  this  purpose:  Figures  12 
(line  3),  32,  48;  pages  88-89,  243,  247,  269. 

(6)  (a)  The  transfer  of  the  monthly  or  periodical  total  of 
issuance  of  each  separate  material  classification  to  a  correspond- 
ing controlling  account:  Figures  12  (line  28),  15  (lines  3,  7), 
32 ;  page  247. 

(b)  Adjustment  of  inventory  differences  when  charged 
to  a  reserve  account  instead  of  directly  to  expense :  Figure  12 
(line  3)  ;  pages  88,  243,  269. 

(7)  Direct  charges  from  pay  records  to  expense  classifications 
for  other  than  direct  producing  labor:  Figures  80  to  82; 
pages  288,  291,  295,  329-331,  338. 

(8)  Time  of  direct  producers  that  requires  analysis  as  between 
direct  and  indirect  production :  Figures  53,  55,  59,  64,  72,  73, 
75,  80  to  82;  pages  276-279. 


Controlling  Accounts  55 

(9)  (a)  The  accumulation  day  by  day,  of  employees'  time 
on  the  pay  roll :    Figures  80,  81 ;  pages  86-87,  284,  288-294. 

(b)  Used  on  a  subsidiary  record  as  a  basis  of  compiling 
the  pay  roll :    Figures  80,  81 ;  pages  284-288. 

(10)  Credits  which  are  given  the  stores  and  stocks  record 
for  the  material  and  finished  parts  issued  to  production  orders : 
Figures  12  (line  28),  15  (line  7),  32,  37;  pages  6,  244-247. 

(11)  Debits  to  Stock  Accounts  for  finished  parts  or  finished 
product  completed  under  a  production  order  number:  Fig- 
ures 12  (line  23),  15  (lines  8,  9),  32;  pages  6,  244-247. 

(12)  Summary  of  direct  or  indirect  production  as  a  means 
of  (a)  arriving  at  totals  for  controlling  accounts  and  (b)  proving 
accuracy  of  pay  roll  by  accounting  for  all  labor  paid  for: 
Figures  12  ("accrued  labor"  group),  80  to  82;  pages  101,  114, 
284,  288-295. 

(13)  (a)  Certain  portions  of  the  time  of  direct  producers 
which  is  charged  against  indirect  production  and  (b)  lost  or 
dead  time:    Figures  12  (line  22),  64;  pages  3,  10,  276-279. 

(14)  Information  available  as  basis  for  determining  the  man- 
hour  constant  for  each  individual  department:  Figures  64,  65, 
68,  69,  81,  82,  84;  pages  310-311,  326-329. 

(15)  (a)  Analysis,  distribution,  and  diffusion  transferred 
from  one  controlling  account  to  another:  Figures  15  (line  25), 
29,  83,  84;  pages  7,  102,  109,  114,  211,  319. 

(b)  Transferring  to  their  proper  account  any  reserve, 
suspense,  or  asset  accounts  that  may  have,  as  a  convenience, 
first  been  accumulated  under  the  factory  overhead  or  commercial 
cost  classifications:    Figure  15  (line  25)  ;  pages  108,  329. 

(16)  Monthly  E^pportionments  of  reserve  and  suspense  items 
charged  into  current  expense:  Figure  15  (lines  10  to  23); 
pages  108,  112-113,  329. 

(17)  Classification  of  cash  receipts  by  geographical  or  terri- 
torial subdivisions:  Figures  12  (lines  8,  26,  29),  16;  pages  87 
(reference  to  sales  will  apply  to  cash  receipts),  90  (re  notes), 
122,  253-259. 

(18)  Classification  of  disbursements:  Figures  12  ("ex- 
chequer" group),  17,  35;  pages  81-85,  109,  133-139,  142-147. 


56  Factory  Accounting 

(19)  (a)  The  departmental  totals  of  elapsed  time  by  days: 
pages  283-287,  291. 

(b)  The  compilation  of  statistics  for  arriving  at  average 
cost  of  operations  on  the  same  parts  over  whatever  period  desired : 
Figures  23,  29,  36,  51 ;  pages  3,  19,  90,  195,  198,  210,  244,  259-261, 
269. 

(c)  Collating  cost  by  operations  on  standing  orders  where 
work  is  used  as  filler  between  other  short-time  jobs :  Figure  36 ; 
pages  164. 

(20)  Application  of  the  departmental  expense  constant 
("overhead")  to  individual  production  order  numbers  on  the 
Production  Register :  Figures  20,  23  to  29 ;  pages  7-8,  170,  195, 
203-211,  310-316. 

(21)  The  entry  of  a  labor  charge  against  its  proper  produc- 
tion order  number  on  the  Production  Register:  Figures  52  to 
75;  pages  8-9,  168-169,  221,  272-276,  284. 

(22)  The  entry  of  a  material,  or  finished  parts,  item  against 
its  proper  production  order  number  on  the  Production  Register : 
Figure  20 ;  pages  90,  101,  168-170,  195,  259-261. 

(23)  The  classification  of  sales  (a)  by  commodities,  (b)  by 
agencies,  (c)  by  states  or  geographically,  (d)  by  advertising 
sources,  and  (e)  by  any  other  desired  angle  of  information: 
pages  11-12,  18,  87,  102-105. 

(24)  (a)  The  entry  to,  or  comparison  with,  the  controlling 
accounts  in  the  Private  Ledger  of  departmental  totals  of  mate- 
rial, labor,  and  overhead  (expense)  charged  against  production 
orders  during  the  period:  Figures  15  ("goods  in  process" 
group),  20;  pages  111-112,  164-168,  187-197,  200. 

(b)  The  entry  to  controlling  accounts  in  the  Private 
Ledger  of  totals  of  production  for  the  period  (finished  parts  and 
finished  products):  Figures  12  (line  23),  15  (lines  8,  9),  20, 
23  to  28,  36 ;  pages  3,  95,  111-112,  170-172,  198-200,  259-261. 

(25)  The  entry  to  the  controlling  accounts  by  classification, 
or  to  the  Profit  and  Loss  Account,  or  to  both,  of  sales  totals  and 
of  the  cost  of  the  goods  parted  with :  Figure  15 ;  pages  87,  95, 
110-111. 

(26)  Credits  to  individual  accounts  with  customers,  for  gross 


Controlling  Accounts  57 

amounts  of  payments  made  (cash  received  plus  discounts  or 
other  allowances)  :  Figures  12  (lines  4,  12,  13),  16;  pages  100, 
122-133. 

(27)  (a)  The  classification  of  customers'  records  for  various 
statistical  data,  (b)  monthly  totals  of  debits,  credits,  and  bal- 
ances (for  proof  of  postings  or  so-called  "trial  balances"), 
(c)  perhaps  a  "Peak"  sheet,  or  "Curve"  sheet  maintained  to 
show  monthly  or,  periodical  fluctuations  of  grand  totals  of  cus- 
tomers' and  debtors'  amounts:  Figures  14,  15  (lines  2,  3)  ; 
pages  99,  104-105. 

(28)  Charges  made  to  individual  customers  and  others,  for 
goods  sold  to  them:  Figure  12  ("receivables"  group)  ;  pages 
87,  95,  105. 

(29)  The  compilation  of  various  data  concerning  production: 
Figures  6,  14,  23  to  27,  29,  37  to  51;  pages  3,  9,  18,  86,  111, 
162-170,  184-200,  210-211,  261-270. 

(30)  Information  furnished  from  time  to  time  (according  to 
the  plan  used)  as  to  units  of  production  completed:  Figures  23 
to  29,  36;  pages  41-42,  198-200,  211,  213,  259-261. 

(31)  The  entry  of  totals  to  the  controlling  accounts  in  the 
Private  Ledger  for  payments  for  purchases  of  material,  expense 
items,  machinerj%  or  other  assets  acquired,  or  for  money  advanced 
for  any  purpose  whatsoever:  Figure  12  (lines  6,  9,  11,  16,  19, 
20,  23)  ;  generally,  Chapter  VII. 

(32)  The  entry  of  credits  to  individual  stores  and  stocks 
accounts  for  the  items  of  goods  supplied  to  customers:  Fig- 
ures 12  (line  25),  15  (line  3),  32;  pages  87,  89  (contra),  95. 

(33)  The  transfer  to  commercial  costs  of  total  amount  of  cash 
discounts  and  other  allowances  to  customers:  Figure  12  (lines 
26,  29)  ;  pages  95-96. 

Classification  of  Accounts 

Figure  9  shows  how  the  details  of  a  manufacturing 
business  are  focused  down  by  classes  of  accounts  to 
general  groups  of  accounts. 


58  Factory  Accounting 

Economic  or  nominal  accounts  are  those  opened  during 
the  accounting  period  to  record  conversions  of  assets 
resulting  in  operating  losses  or  gains.  Incidentally  a 
warehouse  may  be  filled  to  the  ridgepole  with  goods  and 
yet  no  profit  be  made  nor  any  loss  sustained  until  the 
goods  are  actually  disposed  of  and  turned  into  cash 
or  a  receivable.  Hence  anticipated  or  "paper"  profits 
or  losses  requiring  the  increase  or  decrease  of  real 
accounts  are  more  properly  handled  through  operating 
reserve  accounts  (see  page  108)  than  through  the  eco- 
nomic accounts. 

The  broad  use  of  the  expression  '4oss  and  gain 
accounts"  as  applied  to  the  economic  or  nominal 
accounts  is  open  to  objection  in  that  it  vitiates  one  of 
the  main  purposes  of  accounting.  To  call  a  cost  a  loss 
tends  to  obscure  principles,  as  accounting  seeks  to  dif- 
ferentiate between  them  rather  than  confuse  them. 
Power,  for  example,  is  not  a  loss,  but  an  expense  neces- 
sary to  obtain  for  the  business  a  factor  which  is 
prerequisite. 

Eeal  accounts  are  divided  into  various  groups  for 
expressing  the  financial  status  of  the  business.  In  the 
chart  under  the  asset  group  appears  several  subheadings 
having  to  do  with  the  permanence  or  liquidity  of  the 
investment.     Taking  them  in  their  order,  we  have: 

(1)  Active  assets,  meaning  that  they  are  in  a  liquid 
or  fluent  state  presumably  worth  100  per  cent  as  finan- 
cing media. 

(2)  Passive  assets,  meaning  inert,  but  capable  of 
receiving  influences,  usually  subject  to  sharp  discount 
in  liquidation.  In  this  group  is  included  (a)  assets  to 
be  converted  into  other  conditions  for  the  benefit  of  the 
business  as  a  whole,  (b)   assets  to  be  sold  at  a  profit, 


Controlling  Accounts  59 

either  in  the  identical  form  in  which  they  were  invested 
or  acquired,  or  after  they  have  been  subjected  to  a 
process  altering  their  nature,  and  (c)  assets  of  a  more 
or  less  wasting  nature,  invested  in  the  business  to  serve 
as  a  basis   for  operations. 

(3)  Fixed  assets,  meaning  those  to  remain  perma- 
nently invested  in  the  business  to  serve  as  a  basis  for 
operations. 

(4)  Representative  assets,  meaning  investments  in 
certain  lines  of  development,  the  particular  subject  mat- 
ter of  which  their  several  names  indicate.  This  class 
is  very  frequently  referred  to  as  ''intangible  assets" 
on  the  hypothesis  that  it  represents  something,  the 
existence  of  which  may  be  discussed  but  is  not  palpable. 
It  may  be  intangible,  but  nevertheless  it  must  rest  upon 
something  tangible  and  has,  therefore,  a  salable,  though 
not  positively  fixed  or  definite,  value. 

(5)  Deferred  charges,  meaning  certain  benefits  ac- 
quired by  and  for  a  going  concern,  the  full  realization 
of  which  is  spread  over  extended  periods  and  the  value 
of  which  accrues  in  such  periods  rather  than  the  present, 
which  holds  for  them  very  little,  if  any,  debt-paying 
qualifications. 

In  like  manner  the  ''liability"  group  shows  several 
subheadings  having  to  do  primarily  with  the  order  of 
precedence  in  which  the  debts  or  pecuniary  engage- 
ments of  a  concern  take  rank.  These  are  explained 
as  follows: 

(1)  Bonded  liabilities.  Bonds  are,  generally  speaking, 
a  first  lien  on  the  properties.  They  are  in  eifect  long- 
time promissory  notes  bearing  interest  at  a  stated  rate, 
issued  numerically  in  units  of  like  denomination,  payable 
to  bearer  or  to  a  person  registered  on  the  books  of  the 


60  Factory  Accounting 

company  issuing  them,  pledging  to  the  aggregate  of  the 
bondholders  certain  specific  properties  described  cur- 
sorily in  the  instrument  itself  and  in  full  detail  in  the 
contract  which  gives  the  trustee  the  right  to  sell  the 
pledge  for  the  benefit  of  the  holders  of  the  instruments 
if  either  principal  or  interest  is  defaulted  at  maturity. 

(2)  Floating  liahllities,  meaning  the  current  items  or 
sums  due  to  outside  creditors,  which  may  include 
(a)  those  which  are  due,  but  not  as  yet  payable  in 
consequence  of  the  terms  of  credit  extended,  (b)  those 
for  which  indebtedness  has  been  incurred,  but  which 
are,  at  present,  neither  due  nor  payable,  and  (c)  those 
which  are  past  due. 

(3)  Deferred  credits,  representing  nothing  which  has 
to  be  met  for  current  purposes.  For  the  most  part 
this  group  consists  of  (a)  reserves  representing  actual 
losses  of  capital  through  operations,  charged  to  opera- 
tions or  to  manufacturing  cost  of  goods  and  temporarily 
withheld  from  the  asset  accounts  which  they  would 
reduce  if  directly  applied,  and  (b)  reserves  representing 
charges  to  operations  for  losses  or  costs  which  have 
not  yet  materialized  but  will  positively  materialize  in  the 
future. 

(4)  Capital  liahilities,  meaning  the  liability  of  the 
company  to  its  stockholders  for  the  capital  paid  in  or 
subscribed,  together  with  all  surplus  values  and  other 
increments  which  have  not  been  taken  out  of  the  busi- 
ness   by    the    payment    of    dividends. 

Economic  accounts  do  not  usually  require  as  many 
and  diversified  groups  as  do  the  real  accounts,  in  that 
the  factors  involved  are  less  complex.  The  first 
problem  in  constructing  a  system  of  purely  commercial 
accounts  is  always  the  extent  of  the  analysis  between 


Controlling  Accounts  61 

different  items  of  cost  and  different  sorts  of  revenue. 
Every  cost  which  can  be  differentiated  from  other  costs 
and  every  receipt  which  can  be  differentiated  from  other 
receipts,  should  be  so  treated.  Then  it  is  possible  to 
judge  whether  the  cost  is  worth  while  and  whether  the 
price  must  be  regulated  on  a  new  basis.  With  a  proper 
segregation  of  commercial  costs  and  of  production  costs, 
and  a  full  knowledge  of  these  latter,  a  just  and  proper 
selling  price  can  readily  be  determined.  Also  the  proper 
and  economical  conduct  of  the  selling  department  is 
greatly  facilitated. 

In  former  years  the  determination  of  costs  usually 
waited  until  the  end  of  the  fiscal  year,  when  an  inven- 
tory was  taken  and  the  costs  roughly  determined. 
Modem  requirements  demand  closer,  more  accurate, 
information.  If  production  costs  vary,  the  management 
must  know,  and  know  quickly,  what  the  variation  is, 
the  cause,  and,  if  an  increase,  whether  it  may  be  recti- 
fied or  whether  it  necessitates  a  corresponding  increase 
of  selling  price. 

For  this  reason  in  the  great  majority  of  producing 
establishments  the  old  annual  period  is  displaced  by  a 
shorter  period,  usually  a  monthly  or  four-week  period. 
The  four-week  period,  making  thirteen  periods  in  the 
year,  is  advisable  where  the  pay  roll  is  weekly  or 
biweekly,  and  the  calendar  monthly  period  is  advisable 
where  the  pay  roll  is  monthly  or  semimonthly.  The 
plan  of  having  the  closing  period  ''articulate"  with  the 
pay-roll  period  enables  the  cost  department  to  get  at 
the  facts  of  labor  costs  without  having  to  ''dig"  for 
them. 

Broadly  considered,  economic  accounts  have  but  three 
general  subdivisions,  as  follows: 


62  Factory  Accounting 

(1)  Accruing  commercial  costs,  which  are  items  per- 
taining purely  and  simply  to  the  sale  of  product  as 
contradistingTiished  from  the  production  of  such  prod- 
uct.    This   includes   also    expenses   which   have   to   do 


Glued  eddes > 


Fig.  10. — Plan  for  Book  Made  Up  of  Long  and  Short  Leaves 

more  or  less  directly  with  the  delivery  of  the  product 
and  with  collecting,  handling,  freight  on  out-going 
product,  allowances  after  product  has  left  the  factory, 
etc.  Such  expenses  are  a  proper  charge  indirectly 
to  Loss  and  Gain,  but  not  through  production,  and  any 
attempt  to  fasten  them  on  production  will  be  a  purely 
arbitrary  process,  entirely  without  advantage  and 
entirely   destructive  of   accurate   cost. 

(2)  Production  cost  of  goods  disposed  of  is  exactly 
what  the  name  implies.  In  other  days  interim  state- 
ments of  profits  or  losses  were  purely  hypothetical, 
based  on  estimated  cost  of  product.  In  the  more  modern 
manufacturing  establishments  a  perpetual  inventory 
takes  the  place  of  the  annual  physical  inventory  of 
former  days.  This  perpetual  inventory  may  be  said 
to  be  essential  to  an  accurate  and  effective  cost  account- 


Controlling  Accounts  63 

ing  system.  With  it,  the  goods  on  hand  and  their 
values  can  be  determined  from  the  books  at  any  time 
with  but  little  labor  and  delay.  If  materials  or  goods 
are  used  or  sold,  they  are  deducted  from  the  quantities 
or  numbers  shown  to  be  on  hand  by  the  perpetual 
inventory;  therefore  this  inventory  shows  at  all  times 
just  what  materials  and  goods  are  on  hand  and  their 
values.  Thus  through  correlated  records  can  also  be 
determined  the  results  from  the  operations  of  the 
business. 

(3)  Revenues,  which  are  the  gross  amounts  of  income 
from  the  various  sources  or  classes  of  transactions 
participated  in  by  the  manufacturing  proposition  to 
which  it  is  applied.  As  a  matter  of  mere  terminology 
this  group  may  be  called  ''Income,"  ''Gross  Income," 
"Gross  Revenue,"  or  any  other  fitting  caption  suited 
to  the  judgment  of  the  desig-ner  of  a  chart  for  any  par- 
ticular business. 

Account  keeping  by  hand  with  its  hard  and  fast  entries 
on  books  and  sheets  is  at  best  but  stiffly  adaptable 
to  the  many-sided  questions,  whose  answer  it  is  its 
function  to  provide.  Limitations  by  rigidity  of  form, 
which  makes  it  represent  as  absolute,  conclusions  that 
are  only  conditional,  is  its  greatest  defect. 

Modern  accounting  mechanisms  and  aids,  more  fully 
discussed  in  Chapters  XI,  XV,  and  XVI,  offer  the 
utmost  flexibility,  or  rather  fluidity,  in  mode  of  expres- 
sion. This  is  accordingly,  for  aU  analytic  purposes, 
indefinitely  to  be  preferred  to  the  fixed  form  records. 

A  prerequisite  for  rapid  handling  under  the  newer 
conditions  is  that  numerical  codes  must  be  used  to 
represent  certain  data.  Code  numbers  for  this  purpose 
are  shown  in  the  present  chart  and  are  here  explained. 


64  Factory  Accounting 

For  tlie  avoidance  of  confusion  debit  entries  are.  in 
the  main,  assigned  even  numbers  and  credit  entries  odd 
numbers. 

For  instance  an  entry  charging  "factory  material" 
to  Department  3  would  show  the  charge  as  No.  330 
(even)  and  the  credit  as  No.  75  (odd).  An  item  of  sup- 
plies drawn  from  the  storeroom  would  show  the  charge 
as  No.  137  (exception)  and  the  credit  as  No.  77  (odd). 
In  this  latter  case  an  exception  occurs,  and  it  is  because 
of  the  fact  that  in  Groups  E  and  F  the  great  bulk  of 
entries  are  charges,  the  only  credits  being  to  rectify 
errors,  in  which  case  the  200  prefix  is  used  instead  of 
the  100.  This,  however,  is  not  a  hard  and  fast  rule, 
as  numbers  may  be  assigned  as  desired.  It  is  quite 
possible  to  have  the  various  combinations  of  numbers 
represent  specific  information  to  a  greater  extent  than 
is  here  depicted,  as  for  instance,  to  have  certain  classes 
represented  by  digits  of  the  tens  value,  while  the  sub- 
classes thereunder  are  represented  by  the  digits  of  units 
value. 

In  the  practical  use  of  a  numeric  plan  those  concerned 
very  quickly  come  to  know  groups  like,  for  instance, 
''equipment  accounts"  in  the  400  group,  "capital"  in 
the  600  group,  etc. 

The  letters  shown  opposite  the  group  in  the  chart  are 
merely  for  conversational  brevity  between  the  clerks, 
who  may  speak  of  a  "D  account,"  an  "X  item,"  etc. 


LJ 


GENERAL       EXHIBIT 


CHAPTER  VI 

starting  the  ge3jierai.  exhibit 

Mechanical  Features 

The  General  Exhibit,  also  frequently  known  as  the 
''Balance  Sheet  Ledger,  ''General  Business  Record," 
"Synoptic,"  "Cash  Journal,"  "Daily  Exhibit,"  etc., 
is  a  book  of  record  designed  to  give  a  synthetical  pres- 
entation of  the  conditions  as  a  whole.  It  is  intended 
to  show  totals  only,  the  details  of  these  totals  being 
found  in  subsidiary  records.  It  is  quite  possible,  how- 
ever, and  it  is  a  very  frequent  practice,  to  make  certain 
classes  of  original  entry  in  this  book. 

The  groups  of  accounts  on  Figure  9  are  represented 
on  the  General  Exhibit  by  columns,  and  when  the 
summarized  results  from  these  groups  of  accounts  are 
properly  entered  on  the  General  Exhibit,  it  becomes  a 
"going  balance  sheet"  of  the  business. 

Ordinarily  the  number  of  columns  involved  makes 
one  think  of  it  as  a  very  large  form,  w^hich  perhaps  it 
would  be  if  arranged  on  the  plan  of  an  ordinary  book. 
It  is,  however,  usually  constructed  with  wide  and  narrow 
leaves,  used  after  the  manner  of  master  and  slip 
sheets,  so  that  the  requirements  of  the  General  Exhibit 
are  secured  in  a  com^paratively  small  space. 

If  a  book  thus  composed  of  long  and  short  leaves  is 
bound  up  in  the  usual  style,  it  is  obvious  that  it  will 
be  much  thicker  at  the  binding  edge  where  both  long 
5  65 


66  Factory  Accounting 

and  short  leaves  are  in  evidence,  than  at  the  outer 
edge,  where  only  the  long  sheets  appear.  This  results 
in  a  distorted  appearance,  which  becomes  worse  as  the 
book  seasons,  the  covers  "caving"  inward  and  the 
book  generally  becoming  ''sloppy." 

A  plan  for  preventing  the  distortion  of  the  book  is 
to  provide  a  compensating  reinforcement  of  the  long 
sheet.  For  this  purpose  the  sheet  is  made  longer 
than  would  otherwise  be  necessary,  the  extended  portion, 
or  flap,  boing  of  such  lengih  that  when  folded  back  on 
the  sheet  of  which  it  is  a  part,  it  will  more  or  less 
exactly  fill  up  the  space  between  the  end  of  the  short 
leaf  and  the  outer  edge  of  the  book.  The  flap,  or  fold, 
of  the  long  sheet  is  ruled  on  the  exposed  portion  so 
that  it  forms  the  outer  part  of  the  page,  and  is  glued 
in  position.  The  general  effect  of  the  plan  is  to  make 
the  long  sheet  of  the  double  thickness  from  the  end  of 
the  short  sheet  to  the  outer  edge  of  the  book. 

The  exact  point  at  which  the  reinforcing  flap  ends,  will, 
of  course,  vary  with  different  forms,  but  it  should  always 
be  made  to  come  in  such  position  that  figures  are  not 
likely  to  be  written  frequently  over  or  near  its  edge. 

Figure  10  will  help  to  explain  the  construction  of  a 
long  and  short  leaf  book.  In  this  cut  the  long  sheets 
are  represented  by  A  and  D,  A  representing .  the  left- 
hand  side  of  a  folio,  and  D,  the  right-hand  side  of  the 
same  folio.  The  short  sheet  coming  in  between  is  repre- 
sented by  dotted  B  and  C,  B  representing  the  first  page 
of  the  short  sheet,  and  C,  the  second  page.  Under  this 
arrangement,  if  an  entry  is  made  extending  across  the 
entire  folio,  it  will  begin  on  A,  be  continued  on  B  and  C, 
and  end  on  D.  The  new  folio  beginning  with  dotted  A 
will,  if  completed,  be  a  duplication  of  the  one  just  dis- 


GENERAL       EXHIBIT 


Starting  the  General  Exhibit  67 

cussed,  the  page  which  backs  D  forming  A  of  the  new 
folio.  A,  B,  and  C  of  the  following  folio  are  ruled 
on  a  single  sheet,  which  is  so  folded  in  binding  as  to 
make  D  A  the  long  sheet  and  B  C  the  short  sheet. 

The  long  sheet  is  folded  back,  as  shown  in  illustra- 
tion, sufficiently  far  to  make  it  a  double  sheet  from  the 
end  of  short  sheet  C  to  the  outer  extremity  of  the  page. 
The  folded-over  portion  of  the  long  sheet  is  glued  at 
the  edges  only.  This  point  is  important,  as  the  result 
is  very  unsatisfactory  when  the  entire  folded-over  por- 
tion, or  flap,  is  solidly  glued  down. 

While  the  General  Exhibit  is  in  practice  frequently 
referred  to,  it  will  not  require  frequent  entries,  as  only 
the  totals  of  the  subsidiary  records  are  shown  on  it,  with 
perhaps  an  occasional  adjusting  entrj^  The  plan  of  the 
General  Exhibit  permits  its  use  for  original  entries  if 
desired,  but  the  results  are  much  more  satisfactory  if 
it  is  relieved  entirely  of  the  details  of  subsidiary  records. 

The  columns  of  the  General  Exhibit  will  usually  be 
varied,  according  to  the  requirements  of  the  particular 
business,  perhaps  by  the  addition  of  columns  to  handle 
accounts,  or  groups  of  accounts,  w^hich  have  not  been 
provided  for  in  the  chart  (Figure  9)  or,  on  the  other 
hand,  by  the  omission  of  some  of  the  columns,  merging 
two  or  more  columns  into  one. 

The  General  Exhibit  is  opened  with  a  balance  sheet 
of  the  business,  so  arranged  as  to  conform  to  the  col- 
umns of  the  General  Exhibit.  Once  started  in  equilib- 
rium, it  must  be  kept  in  equilibrium,  since  for  every 
item  of  debit  entry  there  must  be  a  corresponding  entry 
or  credit,  and  vice  versa.  The  General  Exhibit  is  the 
perfected  idea  of  double  entry  and  is  complete  in  itself 
so  far  as  being  in  balance  is  concerned.    The  subsidiary 


68  Factory  Accounting 

Balance  Sheet 

Assets 

Imprest  Fund 0            $  500.00 

Current    Cash 10  1,827.19 

Bank  No.  1 20  41,419.28 

Bank  No.  2 22  28,642.71 

Notes    Receivable 30  28,695.80 

Secured    Funds 40  85,000.00 

City  Customers 50  92,614.21 

Country    Customers 60  114,892.16 

Foundry    Material 70  26,233.29 

Woodworking  Material 72  9,151.52 

Factory  Material 74  71,851.55 

Supplies    76  8,642.19 

Raw    Castings £0  9,478.14 

Finished   Parts 82  16,721.98 

Finished   Product 84  21,432.45 

Goods  in  Process 

Department  1  Material 310  38,437.19 

"             "  Labor  312  28,129.32 

"             "  Expense  314  14,218.64 

"             2  Material 320  27,528.19 

"             "  Labor .' 322  26,942.18 

"             "  Expense 324  13,684.19 

"             3  Material    330  19,416.93 

"             "  Labor 332  22,118.60 

"             "  Expense 334  11,982.14 

"             4  Material    340  23,219.10 

"             "  Labor 342  33,928.27 

"             "  Expense 344  22,814.18 

Office  Furniture  &  Machinery 400  2,817.90 

Salesroom   Fixtures 402  1,682.45 

Factoiy    Machinery 404  164,289.17 

Shafting,  Hangers  &  Belting 406  18,928.74 

Local  Transport 408  7,819.42 

Patterns    410  85,436.86 

Small  Tools 412  928.18 

Motor   Trucks 414  8,200.00 

Real  Estate 430  216,000.00 

Buildings    432  114,620.00 

Patents    440  31,651.94 

Good\7ill   442  129,256.41 

Insurance  paid  in  advance 450  1,847.19 

Stationery   and    Printing 452  428.65 

Advertising  in  advance 454  2,640.00 

$1,624,118.43 


Starting  the  General  Exhibit  69 

Liahllities  and  Capital 

Pirst-Mortgage  Bonds 501  $    100,000.00 

Debentures   503  50,000.00 

Notes  Payable 511  75,653.19 

Accounts  Payable 513  36,846.81 

Accrued    Labor 515  9,642.84 

Reserves 

Taxes    551  1,234.20 

Interest  on  Investments 553  6,132.80 

Experimental     555  1,119.24 

Over,  Short,  and  Damag;» 557  922.84 

Variation  of  Weights  and  Zvieasures 559  619.80 

Factor  of  Safety 561  247.92 

Maintenance     563  845.14 

Depreciation     565  16,742.19 

Sinking   Fund 567  26,845.00 

Bad   Debts 569  9,419.27 

General  Loss  and  Gain 603  62,847.19 

Capital    Stock 605  1,000,000.00 

Impairment  and  Surplus 607  22.3,000.00 


$1,624,118.43 


or  auxiliary  records  are  merely  the  analysis  of  what 
appears  in  the  General  Exhibit,  and  must — as  the  sum 
of  the  parts  must  equal  the  whole — always  articulate 
with  and,  as  to  totals,  agree  with,  the  General  Exhibit, 
which  contains  the  controlling  accounts. 

The  General  Exhibit  has  numerous  columns,  but  it 
does  not  at  all  follow  that  qyqtj  line  must  show  an 
entry  in  every  column.  Quite  the  contrary,  as  it  fre- 
quently happens  in  actual  practice  that  on  a  particular 
page  a  number  of  columns  will  have  no  entries  at  all, 
the  footings  carried  forward  to  the  succeeding  folio 
being  the  same  as  those  brought  forward  from  the  pre- 
ceding folio. 

At  the  end  of  each  month  or  period  the  General 
Exhibit  should  be  closed,  as  later  described,  by  balancing 
the  various  controlling  account  columns  after  all  charges 


70  Factory  Accounting 

and  credits  have  been  made,  or,  in  other  words,  after 
all  current  entries  have  been  made.  The  footings  of  the 
''Loss  and  Gain  Accounts"  columns  are  transferred 
to  the  Private  Ledger  column  of  the  Exhibit  by  a  closing 
entry,  thus  absorbing  the  difference  between  the  two 
columns,  which  would  otherwise  appear  as  a  balance. 
The  assets  and  liabilities  balances  are  then  carried 
forward  to  the  next  folio  and  constitute  the  starting 
figures  for  the  succeeding  period. 

Opening  the  Exhibit 

In  opening  the  Exhibit  for  the  first  time,  it  is  quite 
advisable  that  each  item  of  the  balance  sheet  be  shown 
therein  to  the  end  that  the  records  may  be  susceptible 
of  a  quick  and  ready  audit  at  any  future  period  without 
reference  to  a  detached  document,  such  as  a  balance 
sheet  form  or  an  auditor's  report.  By  showing  the 
opening  entry  in  full,  the  record  is  then  complete  in 
itself. 

In  the  case  of  opening  entries  for  subsequent  fiscal 
years,  after  the  Exhibit  has  been  in  use  the  need  of  such 
a  complete  display  is  not  so  pressing,  yet  at  times  it 
may  appear  to  be  the  part  of  wisdom  to  display  it. 
When  all  items  are  not  so  displayed,  the  carrying- 
forward  of  balances  will  be  precisely  the  same  as  that 
shown  in  Chapter  VIII  under  the.  caption,  "Closing  the 
Exhibit." 

To  provide  for  the  student  concrete  examples  embody- 
ing the  fullest  meaning  of  the  various  groups  of 
columns  in  the  Exhibit  an  actual  balance  sheet  has 
been-  selected  for  showing  the  opening  entries.  The 
preceding  figures  are  from  the  balance  sheet  of  a 
high-class     plumbing     goods     manufactory,     arranged 


Starting  the  General  Exhibit  71 

according  to  the  grouping,  symbols,  etc.,  of  the  chart 
of  accounts,  Figure  9. 

Figui'e  11  shows  the  method  of  displaying  the  fore- 
going balance  sheet  on  the  General  Exhibit.  It  will 
be  noticed  that  this  form  is  displayed  in  one  long 
expanse  without  any  division  to  indicate  the-  binding 
space  and  without  cognizance  of  long  and  short  leaves, 
as  described  in  the  opening  section  of  the  present 
chapter.  The  purpose  of  this  is  that  the  student  may 
concentrate  his  thought  on  the  accounting  features 
entirely  without  any  interference  by  reason  of  the 
mechanical  features  involved  in  a  foreshortening  of 
the  pages.  In  the  operation  of  the  book  the  effect  is  the 
same  in  both  cases;  i.  e.,  lines  1,  2,  3,  4,  etc.,  carry  all 
the  way  across  the  folio,  whether  the  book  be  bound  as 
single  pages  (Figure  11)  or  be  equipped  with  one  or 
more  short  leaves  as  previously  explained. 

Each  fifth  line  is  shown  as  a  heavy  line,  and  in 
machine-ruled  forms  these  are  usually  showTi  as  alter- 
nating red  and  blue  lines  down  the  folio.  They  are 
kno^\Ti  as  ''guide  lines"  and  are  an  aid  to  the  eye, 
enabling  the  person  concerned  to  jump  from  one  portion 
of  the  folio  to  another  with  only  a  mental  memorandum 
that,  for  example,  line  18  is  two  above  the  red  line  or 
that  line  24  is  one  above  the  blue  or  "whatever  the  exact 
colors  or  exact  location  may  happen  to  be. 

In  connection  with  the  opening  entries  reference  is 
made  to  the  chart  of  accounts,  Figure  9,  which,  it  will 
be  seen,  by  means  of  certain  features  explained  in  the 
upper  left-hand  corner  thereof,  gives  explicit  directions 
as  to  the  placing  or  location  of  items.  Taking  the 
items  in  the  order  of  their  precedence,  the  reader  can 
follow  the  entries. 


72 


Factory  Accounting 

"Actrt:  Assets  Group"  Entries 


** Imprest  fund,"  being  a  practically  undisturbed 
charge,  is  usually  posted  to  the  ''assets"  group  in  the 
Private  Ledger.  In  this  case  the  entry  appears  on  line  1 
and  is  so  handled.  In  cases  where  concerns  have  con- 
siderable outside  work  and,  in  consequence,  a  number 
of  separate  "imprest  funds,"  it  is  quite  usual  to  have 
a  specific  "imprest  fund"  group  in  the  Exhibit  as  a 
controlling  account.  An  example  of  this  need  is  an 
elevator  works  which  has  construction 
work  going  on  in  all  parts  of  the  coun- 
try and  is,  therefore,  required  to  have 
out,  at  all  times,  a  considerable  amount 
of  working  capital. 

"Current  Cash,"  "Bank  No.  1," 
and  ' '  Bank  No.  2 ' '  are  grouped  under 
the  one  entry  "Cash"  on  line  2,  the 
amounts  of  each  being  placed  in  the 
respective  special  columns  of  corre- 
sponding caption.  In  Figure  9  it  will 
be  seen  that  these  accounts  appear  in 
capitals,  indicating  the  presence  of 
special  columns  in  the  Exhibit. 

"Notes  receivable"  is  shown  on  line 
3,  and  the  amount  is  allocated  in  the 
' '  assets ' '  group  of  the  Private  Ledger. 
There  are  many  cases  where  the 
"notes  receivable"  item  is  so  large,  or 
so  important,  or  so  fluctuating  in  total 
value  that  a  special  group  is  an 
advantage.  A  special  control  is  quite 
imperative    where    the    sales    of    the 


3.07  0.0  8. 

3  8.4  2  6.91; 
.113,6  6  1.0  1 

I  2  2.2  4  9.6  6  i 

4  4.0  Y  4.9  4 

2  7,0  1S.7Bi 
9  2.6  15^3 

5  5  0.5  i; 

II  4,9  4  2  J.  6 
1,18  5.59  1 

i.5  4.8  8  3.40 
6  9.4  0i 
A7,6  3  2.5  7 
6.507.33  • 
iOe,608.96 

18.5  Si 
1  4  4,0  3  9 .6  i 

11.0  8; 

6  2.6  9  9.15 

2?  1,13  2.7  0 

2  0  0.0Ci 

6.3  56.5  9 

622,099.15 

5  5,0  0  0.0  0 
1,5  6  3,5  0  0.3  8  1 

3  5,4  2  4.2  9 
8  7,198.7  3; 
4.7,7  0  5.9  4- 
47,705.94; 

1,2  2  3.6  0 
64,128.40; 
1,4.0  16  1 
8  14.5  5; 

1,9  5  3,0  78^2  5  5 
1,9  5  3,0  7  8.2  5  » 


U^V^^»»''^^V^^fc^V»»^<*^*»»^ 


Fig.  13.— Adding  Ma^ 
chine  Strip  of  In- 
terim   Footings 


Starting  the  General  Exhibit  73 

concern  involve  extended  payments  secured  by  prom- 
issory notes,  as,  for  instance,  in  the  piano  business. 
Quite  often  a  further  segregation  is  made  and  kept  in 
a  special  group  of  columns,  showing  notes  which  have 
been  hypothecated  but  in  which  the  company  still  has 
a  contingent  liability.  In  this  latter  case  the  opening 
entry  would  show  on  the  debit  side  of  the  gi'oup  the 
face  value  of  the  notes  and  on  the  credit  side  the  amount 
which  had  been  advanced  upon  them.  In  this  way  the 
contingent  liability  in  the  entire  list  of  notes  would 
be  indicated,  where  if  merely  the  difference  between 
the  debit  and  the  credit  side  were  sho\sTi,  it  would  pre- 
sent a  single  item  of  somewhat  questionable  statistical 
value.  In  carr^'-ing  forward  these  ^'sold  notes"  from 
month  to  month,  the  paid  notes  should  be  eliminated 
and  the  amounts  forwarded  should  represent  only  the 
outstanding  values  involved.  "Secured  funds,"  shown 
on  line  4,  is  an  item  to  all  intents  and  purposes  like 
that  of  "notes  receivable,"  and  the  same  rules  apply. 
Customers  accounts. — In  this  particular  concern  there 
are  in  fact  eight  subdivisions  of  customers,  namely  A  to 
F,  G  to  L,  M  to  E,  and  S  to  Z  in  both  city  customers 
and  country  customers;  but  in  the  example  only  two 
subdivisions  are  made  on  line  5,  a  total  of  city  customers 
and  a  total  of  country  customers.  For  some  concerns 
it  may  seem  advisable  to  carry  an  individual  controlling 
account  for  each  of  the  eight,  more  or  less,  separate 
ledgers  that  may  be  used,  and  in  other  cases  the  space 
in  the  Exhibit  might  be  economized  to  some  extent  and 
yet  have  full  controlling  information  by  means  of  sub- 
sidiary accounts.  This  plan  is  convenient,  providing 
the  records  of  original  entry  show  the  necessary  segre- 
gation of  the  items  for  the  various  ledgers  or  that  the 
columns  be  analyzed  after  the  manner  described  in  con- 


74 


Factory  Accounting 


L 

c 

~ 

"■" 

■^ 

"" 

— 

"" 

^ 

"~ 

■^ 

^ 

■M. 

■~" 

I 

"" 

^ 

'^ 

T 

T 

m 

<V 

t~ 

^ 

>o 

N 

5, 

^ 

in 

m 

^ 

o 

n 

'^ 

oo 

K 1^ 

■0 

\r>_ 

V 

1 

n 

o 

r- 

1^ 

«1 

r\ 

t^ 

Oi 

* 

r> 

•^ 

>0 

»-» 

kT) 

pq 

T 

^ 

>^ 

d 

in 

« 

o 

» 

« 

nn 

2 

r 

O 

f 

r* 

tA 

o 

rt 

0> 

rt 

•o 

fi 

^ 

o 

in 

10 

oo 

< 

33 

o 

n 

Ov 

w 

■0 

^ 

oo 

i 

ri 

K 

-<r 

uC 

ri" 

« 

«■ 

<f 

£- 

tf 

to 

s 

^ 

rT 

J- 

OT 

N-eJ 

H 

c^ 

w 

p> 

a 

w 

ty 

fi 

». 

o 

rt 

n 

« 

n 

t-t- 

r< 

n 

rt 

N 

10 

«« 

J- 

■^-f 

"IT 

~ 

"IT 

~ 

~ 

~ 

~ 

~ 

~ 

~ 

~ 

T" 

~ 

„ 

~^ 

~ 

~ 

~ 

« 

I 

▼4 

« 

(S 

w 

a 

tn 

01 

^ 

r> 

<Sl 

o 

o 

o 

<o 

f\ 

V 

in 

«4 

*     1 

a 

1 

'^ 

^ 

h: 

"1 

« 

v\ 

«! 

O) 

0^ 

s 

Q 

•o 

•0 

n 

r; 

T 

><! 

^ 

»i 

'U  . 

»- 

^ 

r^ 

<S 

o 

N 

d 

o 

■* 

o 

i-i 

OV 

T 

i-t 

rt 

o 

OJ 

-» 

o 

« 

f% 

o 

« 

« 

o 

o> 

"O 

* 

cu 

■♦ 

\^ 

<  ^ 

o 

»- 

n 

'*. 

T^ 

« 

in 

o 

o 

f*" 

w 

K 

cC 

■T 

c>- 

K 

■r 

X^ 

xf 

K 

of 

-»■ 

<T 

«- 

■* 

w 

r. 

t* 

^ 

rl 

f. 

!J 

M 

_ 

~o 

~o 

~ 

<e 

~ 

~ 

~ 

»- 

~ 

~ 

o 

0\ 

"iii 

o 

~oi 

~ 

~ 

~ 

<Q 

^ 

^^ 

!< 

IV- 

^ 
t- 

o 

r> 

0» 

■^ 

•J; 

6 

>« 

^ 

0> 

N 

id 

-1 

o 
o 

* 

« 

■0 

^ 

°i 

d 

^ 

o 

r 

o» 

o 

o 

rl 

>* 

T 

vVTx 

to 

ts 

r- 

o 

t^ 

10 

f 

-^ 

<-* 

■^ 

■▼ 

o 

ri 

■* 

05 

o 

K 

of 

•0 

w 

«&■ 

tv" 

u^ 

Iff 

K 

^' 

A 

tf 

n.  .. 

-fT 

=B 

"S 

=S 

^ 

"^^ 

™^ 

' 

^ 

^^ 

"^ 

Oi 

~0> 

r» 

^X. 

o 

a 

*H 

*^ 

^; 

-*. 

^ 

ITt 

Ol 

ti 

d 

o 

t^ 

t^ 

o 

^ 

Ijo 

o 

o 

•C 

»o 

<> 

w 

o 

^^ 

U) 

9- 

^ 

1 

" 

ot- 

rf 

<^f 

^ 

v? 

~ 

— N 

-!5 

~F 

V 

r< 

"5; 

pg 

I- 

/^^ 

:_, 

O 

o 

c» 

•O 

tH 

<-j 

r- 

»< 

^ 

^ 

I ' ) 

< 

l^ 

0) 

't' 

^ 

o 

v/ 

>-   u 

o 

a 

•r 

T^ 

01 

>« 

0\ 

M 

t^ 

<0 

Ot 

c\« 

. 

1 

"' 

A 

»1 

r4 

cT 

(V 

o" 

^. 

"^ 

"o 

T< 

"^ 

~ 

"o 

~ 

o 

~ 

"^ 

^^ 

~ 

"^ 

"^ 

o 

T 

n 

c 

o 

O 

o 

r* 

<v 

V 

t^ 

CD 

o 

r^ 

H 

o 

m 

t^ 

o 

H 

H 

k/l 

o 

o 

a 

n 

_^ 

-« 

J^ 

•« 

>" 

_12 

»- 

°° 

ff. 

i 

< 

1 

• 

1 

kiiwii;;»ii"«|[ 

•  4 iy 

u 

-M 

i2 

H.:.l:.J..J..|,:...i....:U4... 

^^l-l,.|  .)-„.L,.iJ,...- 

^ 

^^ 

aam 

■■■^ 

•■■f^ 

^™ 

^^ 

^" 

= 

^^ 

^^ 

^^ 

^^ 

2 

s 

;^ 

2 

2 

g 

7 

3 

K 

r-t 

1 

R 

1 

s 

s 

S 

r^ 

s 

T 

Z 

D 

O 

3 

w 

w 

j; 

(J 

1 

CJ 

« 

■u 

< 

I 

» 

a 

« 

B 

1 

fc 

U- 

ta! 

2 

s 

o 

/9 
3 

1 

♦» 

tf 

JJ 

£ 

a 

s 

° 

^ 

? 

t 

u  . 

-• 

M 

e 

s 

A< 

+» 

^ 

^ 

A. 

a 

r1 

iS 

1 

5- 
< 

■£ 

IE 

*=• 

1 

t 

, 

1 

(= 

4 

1 

1 

1 

1 

1 

t 

i 

v> 

•1 
1 

•"I 

2 

1 

1 

1 

K 
♦* 

c 

o 

♦* 

s 

1 

1 

r 

i 

5 

S 

" 

<^ 

•  n 

-< 

o 

►1 

" 

^ 

^ 

■« 

i 

£ 

" 

o 

(E 

. 

__ 

_^ 

_ 

_ 

J 

_ 

_ 

_ 

__^ 

^^^ 

^, 

, 

_j 

_ 

I 


Starting  the  General  Exhibit  75 

nection    with    Figure    16,    ''others    accounts"    column 
(page  130). 


**  Passive  Assets  Gkoup"  Entries 

The  ''stores  and  stocks"  entry  on  line  6  comprises 
"foundry  material"  (70),  "woodworking  material" 
(72),  "factory  material"  (74),  "supplies"  (76),  "raw 
castings"  (80),  "finished  parts"  (82),  and  "finished 
product"  (84).  Of  these  the  first  four  items  are  classed 
as  "raw  stores"  and  therefore  appear  in  the  controlling 
column  of  that  caption;  and  the  latter  three  items  are 
classed  as  "stocks"  (material  upon  which  labor  and 
overhead  has  been  expended)  and  are  shown  in  the 
"stocks"  group.  The  allocation  of  the  items  in  the 
columns  as  shown  is  self-explanatory;  but  in  connection 
with  this  particular  entry,  it  will  be  noticed  that  the 
figures  encroach  upon  the  lines  of  other  items  bearing 
no  particular  relationship  to  the  present  items.  This 
is  an  example  of  economy  of  space.  Theoretically  the 
"stores  and  stocks"  entry  should  take  up  lines  6  to  14 
inclusive.  In  actual  practice,  however,  it  will  be 
observed  that  the  more  lines  that  are  used,  the  more 
frequent  will  be  the  need  of  carrying  forward  folio 
footings,  which,  as  far  as  practicable,  should  be  mini- 
mized. In  practice,  therefore,  figures  can  be  injected 
into  any  available  space,  provided  the  meanings  of  the 
entry  are  kept  positively  clear  and  do  not  obscure  the 
meaning  or  character  of  any  other  entry.  In  this  case 
it  was  clear  that  nothing  whatever  was  present  in  the 
"raw  stores"  column;  hence  that  space  was  available 
for  the  first  five  items.  By  having  the  entire  balance 
sheet  spread  before  the  accountant,  it  was  also  apparent 
that  the  last  three  items  would  not  conflict  with  the 


76  Factory  Accounting 

entry  for  line  7;  hence  the  entry  could  clearly  be  made 
as  it  is  shown.  If  the  entry  for  line  7  had  not  been 
previously  known,  either  the  entry  could  have  been  made 
as  it  is  on  a  chance  and  if  necessary  the  next  entry 
started  on  line  9,  or  the  three  amounts  could  have  been 
shown  on  lines  3,  4,  and  5  respectively,  and  the  account 
numbers  80,  82,  and  84  in  connection  therewith  shown 
in  the  symbol  column  under  ''Accruing  Manufacturing 
Expense." 

In  whatever  way  an  encroaching  entry  of  this  kind  is 
made,  a  bracket  should  be  drawn  embracing  all  the 
figures  involved  and  showing  the  point  of  the  bracket 
opposite  the  line  on  which  the  entry  properly  belongs. 
This  is  essential  from  the  fact  that  it  sometimes  becomes 
necessary  to  check  back  entries  when  a  folio  is  out  of 
balance  and  the  error  or  oversight  has  to  be  located. 
Incidentally  a  better  medium  for  detecting  errors  can 
hardly  be  evolved  than  the  General  Exhibit,  which  has  in 
itself  the  proof-by-balance  feature  focused  down  to 
individual  folios. 

''Goods  in  process"  items,  shown  on  lines  7  to  10 
respectively,  are  allocated  under  the  three  cost  elements 
represented  by  colmnns,  namely,  "Material,"  "Labor," 
and  ' '  Overhead. ' '  This  subdivision  is  sliglitly  more  than 
the  chart  shown  in  Figure  9  indicates,  the  latter  showing 
but  one  controlling  account  with  "goods  in  process." 
This,  however,  is  an  example  of  the  latitude  of  expansion 
and  contraction  possible  in  practice  in  the  planning  of 
General  Exliibits.  No  column  is  sho^vn  in  this  group 
for  symbol  numbers ;  if  it  appears  essential  to  show 
such  reference,  they  may  be  shown  small  in  some  nearby 
space  (after  the  manner  shown  opposite  the  "overhead" 
item  on  line  7),  this  being   so  indicated  as  positively 


7 
f- 

m 

3> 
), 

)r 
id 

e- 
a. 
)t 
d 

10 


1- 
u 
a 

g 


LS 
it 
), 

n 


Lr 


GENERAL      EXHIBIT 


O 


Starting  the  General  Exhibit  77 

to  avoid  any  confusion  or  mistakes  of  including  the  ref- 
erence  figures   as   having   financial   values. 

''Office  fixtures  and  machinery"  (400),  ** salesroom 
fixtures"  (402),  "factory  machinery"  (404),  *' shafting, 
hangers,  and  belting"  (406),  "local  transport"  (408), 
"patterns"  (410),  "small  tools"  (412),  and  "motor 
trucks"  (414)  appear  on  lines  11  to  18  inclusive  and 
are  allocated  in  the  "Equipment"  group  with  the  corre- 
sponding symbol  number  shown  opposite  each  item. 
The  use  of  a  separate  group  for  "equipment"  is  not 
absolutely  essential  in  all  cases,  but  can  be  embodied 
with  the  "assets"  group  of  the  Private  Ledger  when  so 
desired. 

"Vaeious  Assets  Geoup"  Entries 

"Eeal  estate"  (430)  and  "buildings"  (432)  are  em- 
bodied in  one  item,  "fixed  assets,"  and  entered  on 
line  19,  v»^ith  an  encroachment  on  to  line  18,  with  a 
bracket  as  hereinbefore  explained,  the  same  thing  being 
done  in  the  case  of  "representative  assets,"  which 
encroach  on  line  21.  "Patents"  (440)  and  "goodwill" 
(442)  constitute  the  "representative  assets." 

"Deferred  charges,"  or  what  are  called  "suspense" 
items,  are  shown  on  line  21,  and  an  encroachment  is 
made  on  lines  22  and  23,  with  a  proper  bracket  about 
the  figures  for  "insurance  paid  in  advance"  (450), 
"stationery  and  printing"  (452),  and  "advertising  in 
advance"  (454). 

"Liabilities  Geoup"  Entries 

"First-mortgage  bonds"  (501)  and  "debentures" 
(503)  are  grouped  under  the  item  "bonds"  and  appear 


78  Factory  Accounting 

on  line  22,  with  an  encroachment  on  line  23,  properly- 
bracketed. 

*' Accounts  payable"  as  entered  on  line  23  consists 
of  *' (creditors)  accounts  payable"  (513)  and  ''(pay 
roll)  accrued  labor"  (515),  each  of  these  classes  having 
a  separate  control  group  into  which  the  items  are 
allocated. 

** Notes  payable"  (511)  appears  on  line  24  and  is  listed 
under  the  ''liabilities"  group  of  the  Private  Ledger. 
Like  "notes  receivable"  this  amount  is  sometimes  suffi- 
ciently important  to  demand  a  separate  display  in  a 
group  all  its  own. 

The  "reserves"  items  listed  in  the  balance  sheet  are 
grouped  in  one  item  on  line  25  and  stated  as  "deferred 
credits."  These  are  all  separately  listed  by  amount 
and  symbol  number  in  the  "reserves"  group,  with  an 
encroachment  on  lines  16  to  24  inclusive,  being  properly 
bracketed.  In  this  case  as  no  figures  appear  to  the 
right  of  the  "reserves"  columns  on  lines  16  to  25, 
there  is  no  real  need  of  a  bracket  at  the  right-hand 
side  of  the  figures;  hence  none  is  shown.  In  two  of 
the  items  it  was  necessary  to  crowd  the  amount  into  a 
neighboring  column.  In  devising  a  book  care  must  be 
exercised  to  provide  sufficient  space  for  given  require- 
ments, yet  in  a  large  book  the  space  cannot  be  extrava- 
gantly used  without  making  the  book  cumbersome.  At 
times  a  little  crowding  has  to  be  resorted  to  on  almost 
any  book,  but  when  the  lines  are  in  colored  ruling  inks, 
the  black-ink  entries  over  them  do  not  convey  the  impres- 
sion of  crowding  quite  as  much  as  is  apparent  in  the 
present  all-black  form. 

The  last  three  items,  "general  loss  and  gain"  (603), 
"capital  stock"  (605),  and  "impairment  and  surplus" 


79 

28 
der 

ous 

on 

the 

ing 


ben 
bly 
ake 
een 
^ht- 
are 


vj 


o 


Starting  the  General  Exhibit  79 

(607),  are  entered  respectively  on  lines  26,  27,  and  28 
and  are  all  allocated  in  the  ''liabilities"  group  under 
the  Private  Ledger  heading. 

With  all  the  entries  made  as  stated,  the  various 
columns  are  footed,  the  debit  footings  being  shown  on 
the  upper  footing  line  and  the  credit  footings  on  the 
lower  line.  On  the  adding  machine  the  cross  footing 
will  then  show  as  follows : 


$        1,827.19  $1,513,500.38 

41,419.28  36,846.81 

28,642.71  9,642.84 

92,614.21  64,128.40 

114,892.16  


115,928.55  $1,624,118.43 

47,632.57  — — = 

108,601.46 

109,118.46 
62,699.15 

290,102.70 
4,915.84 

605,724.15 


$1,624,118.43 


Footings  should  not  be  first  made  in  ink,  as  when 
that  is  done,  through  the  irony  of  fate,  almost  invariably 
some  little  difference  will  necessitate  erasures.  Make 
the  first  test  in  pencil,  and  when  the  folio  has  been 
proved,  mark  it  0.  K.  (as  indicated  in  lower  right- 
hand  corner),  and  then  be  sure  that  the  footings  are 
carried  forward  to  the  next  folio  without  error. 


CHAPTEE  VII 
current  exhibit  entries 

Oeder  of  Entries 

Figure  12  represents  folio  2  of  a  General  Exhibit 
record,  showing  current  entries.  Let  it  be  understood 
that  a  folio  similar  to  this  in  a  regular  bound  book 
after  this  plan  would  have  perhaps  sixty  entry  lines, 
whereas  the  present  figure  shows  but  thirty  entry  lines. 
Moreover,  this  figure  purports  to  show  entries  covering 
eighteen  days  of  a  calendar  month,  whereas  in  actual 
practice  the  entries  of  a  fair-sized  business  during  that 
period  might  cover  three  or  four  times  as  many  lines 
on  the  General  Exhibit.  The  entries  here  shown  are 
picked  at  random,  in  order  that  a  number  of  different 
transactions  might  be  recorded  in  more  or  less  concise 
form;  furthermore,  recurrence  of  the  same  kind  of 
entries  is  shown  in  order  to  set  up  the  semblance  of 
correct  detail,  which,  in  fact,  does  not  exist  on  this 
condensed  form.  A  certain  amount  of  '  daily  routine 
entries  must  be  assumed;  as,  for  instance.  Check  Regis- 
ter, sheet  2,  would,  in  the  ordinary  course  of  events, 
be  entered  between  the  entry  of  Check  Register,  sheet  1, 
on  line  6,  and  sheet  3,  on  line  11,  and  deposits  would 
be  made  practically  every  day  instead  of  only  seven 
times  in  a  period  covering  more  than  half  a  month. 
In  short,  this  illustration  does  not  essay  to  cover  all 
entries  probable  in  the  given  time  nor  is  it  likely  to 

'  80 


81 

state- 
scru- 
le  21, 
point, 
ent  a 
point 
illus- 
that 


■epre- 
its  of 
LS  the 
y  the 
■neral 
value 
daily 
:'cised 
it  by 

suffi- 
)ming 

they 
cases 
3posit 
t  are 
3eipts 
randa 
debit 
ssibly 
aalize 
dance 


v_^ 


CHECK  REGISTER.  Month  of  c7^.f^.^  /f/^         ::s::z,'ti::iitiL 

B/=KNK    CHECKS 

Payee 

Accounts       0, 
For                                Payable 

scounT 

OTHER      ACCOUNTS            II 

=/u 

^=mo.   /  '=;^<;''^ 

Bi.nkNo.  1          Bar 

Cr 

k  No.  Z 

Ujy 

Cr 

Dr 

Symbol 

cr         1 

Vj          :>? 

JJSlJi  V    b"!!. 

.UM^o     _. 

/ 

Z/^^UajiM^  Qia^jjj^. 

^^c^^M^OLOi^ 

. 

Jo;  00 

"'m, 

^      ^v          ^ 

/?ll"« 

'^i£'i\d'u:c^'^hjr^a^Ae^ 

'A-,            ^  ^ 

litli' 

3f3o 

"'„. 

/n 

^       y 

■  JO  oo 

i/ 

V,<t>y^i^„T^ir  ^di-tlyK^^r^^ 

f<r^-c^.  <si:^\K)k^^ 

*B2J 

^  0 

/fc2£         f*2' 

lir>lS 

1QAJ.^^.Jt^,^y                 J^i^^A^xJ.^             INI 

/ij£ 

it 

^              ,2 

/5ifei 

.T 

.1^^  O^n^ltT^    (Sa^iiAJ.^       . 

^/iK^/u^  iJ&t.aeAsJt. 

1S2S.7 

./              3 

/ 

u-oiUS 

•Sijtxj.  -^A^cv  -rO, 

'h  V«  Y,                     /^IjUcoII  I 

llhU- 

e  ■ 

.Sooo            iij-S 

.55oo 

CZm.c'ji A jr^-^  CCM/h,.i-l  Cm^^,jtjfj 

^x/.?^  /<7/6 

.SSOO 

/J<? 

---        ..---^^ 

/DOOo 

^llur<Sajx£a,r^' 

v/^«a>«.^j,^^  ^/)i^2€/7».d^ 

/JIJOO 

/?6 

s/ 

5t3  oo 

Ajtjr..rrjil  Sir^M^g-A.^ 

,?,nc 

itol. 

i' 

/3r3oO               ?'!'!</ 

ir)0  0o 

n 

^XJiJO^r^^jLn.  \3a.  '^^LLA.  <Xi.i^i 

(Ms.^,^f>r^Juu^^    " 

/■)ooc 

M-SU 

y/     ;jj2 

234«io 

C^A^/nyMo/t^i.  V  /l\'^O.j,y 

Yrq            '          '                     .! 

SsJoo 

v5;  fo 

...     1^ i 

-Ojoo 

Q,MAA^if^  ad^-^7nrj:,.e„ 

OUfnacl^  t^:aj!b,dM^ 

/>DO 

^ol 

2 

0  0   Co 

Z] 

^      iiic 

21  Sdo 

S.Qisyi^^jL^  C/U:i^r,^a^C&^ 

Hi  00 

USi 

•J 

__.36ii      -. 

3/Lnajdl  Jdn^^ii^^l 

.3  Szz 

>/               2 

!i0303  OO 

^JAJlt  7l/U,.<rML-f  '^CUr^ 

71  o=fei    #  <S  *^2-            ' 

*a 

Vn 

n  -1 

«;ioo             3 

[fitOO 

lO^^^tc^^tt  (Pd:,  \Jf  Qx-i^ 

Jh^^i                     ^^"4  1 

[  . 

^a, 

!. 

3T? 

v/                        U 

l:)ilSU     -- 

8- 

y^^  <py>.<a?,yG^A.ci^. 

C^^.  0?x>^ 

...aas 

0S.3  /o 

SlU- 

)/  Jnt 

GfxDu>j«'(%«^<3>,  y^icrUoH^ 

.%iiiA,C3aC  ^■Ccl.es^ 

=  00 

I.U 

^              5 

niso 

THxjrAneJl  9.  M^rr.^,^     ' 

72ib 

S&7. 

s/       GiS^ 

'mi^'"'.:'. 

i 

^XrxM  TlcCtim^upJ  QayJ^Jy 

tJ^*C&3 

'  ••  " 

■-•-  YUVio. 

■30 

^ 

y           = 

9  SoO  OO 

Tn'ifeynyT^.^  Q.e-tiXt^  (i 

J^37ca£//o.  3i.niy« 

', 

Sbioo 

U-30 

V 

ct*;  AxA'  djtajU  XtA^l^rf^  -U  Cr^JiU^:f  'Cc-r-dixudA  1  1 

V       ^(jC 

=  23/2. 

^r^rL£su>.  iMM/,jf^ 

Gn^JTMilir,^  tL  iuMfb^l 

&lli2 

yoo 

^           ; 

5do  00 

11'       II  '  >A{.u^o  \/]Aityiv^^ 

i,:o» 

U-Si> 

j^       ilS'j 



lo 

MLt -yi  ffc^  a,  ?nu^  ■   ( 

fZ^PC 

.,>.. 

'M 

> 

^1 

u 

_..        V S 

.Ai-^11      . 

J^^/H*.aV    ■ijAATl/y^ 

'V,,,  '/-/-^ 

UllS 

a 

S  SS  SJ 

'""ii 

s 

■^          5 

ttbri 

We^*joUt<ur^   Q)ea^d^f^ 

y:?J^^  -2// 

JflSc 

■  511  "'" 

-Sl  ~,t 

?".s 

"i: 

1 

S,  3- 

o 

/iu-^           iSjc 

/ifc 

'J]//fl^dxji^-/Uru\yr^iU^  C3>. 

.L'.t^'. 

-■    '    s, 

'i. 

\ 

P" "" 

V          ?U£ 

lii^o 

%^t   TKU,.  (Sc. 

/>         " 

liSac 

/JSh   ■ii: 

i35il 

$,iy 

? 

.Ji 

iZ            5 

? 

Ul'^IS 

fUf  dccXji.  tZa%^JfzKnlLtA/iC°, 

■V-.S 

llsoc 

Jg£ 

u,           ^ 

^ 

l>00o             ii'ac 

/St.  00 

cX<L,L^£A/    C\^  -^A^nXt 

too  00 

USX, 

^    -   ... 

?  So<.o 

/ 

Jit.  ftf/1/noAH'  4le^^i^:UJ 

{/Ak/nAAAj  (jryCfKil^uXc-o-^ 

/ 

ISbOc 

'«? 

I*: 

/7i.;yj?3,  ?*  i 

Voclk 

^ 

li 

lil^r 

^,Ji^/<,«j^ 

• 

'I 

ijl^/i 

Fio.  17.— Check  I 


o 


o 


Current  Exhibit  Entries  81 

present  wliat  would  be  considered  a  well-equalized  state- 
ment at  any  interim  period,  as  will  be  noticed  in  scru- 
tinizing what  represent  pencil  footings  under  line  21, 
taken  to  test  the  equilibrium  of  the  folio  at  that  point. 
A  regularly  employed  General  Exhibit  would  present  a 
full  and  complete  statement  of  the  business  at  any  point 
where  all  subsidiary  records  were  entered;  this  illus- 
tration is  intended  to  demonstrate  the  principles  that 
make  that  fact  possible. 


Exchequer  Accounts 

The  ''current  cash"  group  under  ''Exchequer"  repre- 
sents merely  the  transitory  stage  between  receipts  of 
money  and  the  deposit  of  such  money  in  the  bank.  As  the 
individual  Cash  Receipts  Sheets  (Figure  16)  cany  the 
details  of  these  transactions,  this  group  in  the  General 
Exhibit  is  a  control  only  and  is  of  no  particular  value 
beyond  that.  Reference  is  not  made  to  it  for  a  daily 
cash  balance,  and  its  main  and  only  function  is  exercised 
at  the  end  of  the  month  only.  It  receives  credit  by 
way  of  deposit  entries  before  it  shows  as  having  suffi- 
cient money  to  deposit,  the  charges  it  receives  coming 
only  with  the  entry  of  the  Cash  Receipts  Sheets  as  they 
are  completed  and  ready  for  entry.  In  many  cases 
where  the  General  Exhibit  is  employed,  the  deposit 
entries  are  not  made  in  the  Exhibit  at  all,  but  are 
made  in  the  memoranda  column  of  the  Cash  Receipts 
Sheet  (Figure  16).  In  most  cases  this  memoranda 
column  totals  to  the  same  amount  as  the  "Cash"  debit 
column  does,  but  if  it  does  not,  it  equalizes  itself  possibly 
at  the  end  of  the  next  sheet.  If  it  does  not  so  equalize 
itself  at  the  end  of  the  month,  there  must  be  a  balance 


82  Factory  Accounting 

carried  over  to  the  succeeding  month,  just  as  was 
the  case  in  the  opening  entry  on  line  2  of  Figure  11 
In  actual  practice,  where  all  receipts  of  cash  are  depos- 
ited intact,  it  is  but  seldom  that  such  a  balance  is 
carried  forward,  as  the  quite  usual  practice  is  to  enter 
such  receipts  of  cash  as  may  come  in  after  banking 
hours  on  the  last  day  of  the  month  and  to  deposit  them 
on  the  first  day  of  the  succeeding  month  as  of  the 
preceding  date.  In  fact,  some  pursue  the  erroneous 
plan  of  considering  two  or  three  days  of  the  succeeding 
month  as  of  its  preceding  month,  under  the  hallucination 
that  a  better  showing  of  collections  is  being  made. 
This  might  be  so  were  it  not  repeated  every  month 
successively. 

"Where  deposits  are  entered  from  the  Cash  Receipts 
Sheet,  the  entries  in  the  Exhibit  differ  slightly  in  that, 
aside  from  the  debit  to  Current  Cash,  there  is  also  a 
credit  to  Current  Cash  and  an  offsetting  debit  to  one 
or  both  of  the  banks,  as  the  case  may  be.  The  question 
naturally  arises  as  to  the  need  of  the  ''current  cash" 
group,  yet  every  time  the  author  has  been  persuaded 
to  omit  it,  frequent  needs  for  it  have  seemed  to  arise, 
with  the  result  that  a  more  or  less  awkward  entry 
of  the  cash  on  hand  had  to  be  carried  to  the  "various 
assets"  group  and  posted  to  a  ledger  account  followed 
by  a  similar  entry  in  the  succeeding  month,  crediting 
it  out  of  the  ledger  account  and  transferring  it  to  a  bank 
account.  Where  a  "current  cash"  group  is  present,  the 
Private  Ledger  Account  under  the  caption  "Current 
Cash"  is  used  to  show  the  totals  of  monthly  entries  for 
statistical  pui^poses;  thus  the  total  debit  during  the 
month  and  the  total  credit  during  the  month  vnW  not 
only  show  up  any  undeposited  balances  on  hand,  but 
from  beginning  to  end  of  the  year  the  account  will  be 


Current  Exhibit  Entries  83 

cirmiilative  and  will  be  of  value  as  a  record.  This 
condition  obtains  also  in  the  case  of  the  banks. 

In  the  *' banks"  groups  the  exact  status  of  any  of  the 
individual  bank  accounts  cannot  be  determined  unless 
all  deposits  are  shown  and  all  Check  Register  Sheets 
entered,  or,  if  not  positively  entered,  taken  into  consid- 
eration. In  some  concerns  both  Cash  Receipts  and 
Check  Register  Sheets  are  closed  with  each  business 
day  and  the  totals  carried  to  the  General  Exhibit,  in 
which  case  the  showing  of  the  Exchequer  is  complete. 
In  other  concerns  pencil  footings  are  made  at  the  close 
of  each  day  and  shown  in  the  Exhibit  in  pencil  until 
such  time  as  the  sheet  is  filled  and  actually  transferred 
to  the  Exhibit,  when  the  positive  ink  figures  supersede 
the  pencil  memoranda  figures. 

In  order  to  make  controlling  accounts  show  accumu- 
lated totals  properly  for  statistical  purposes,  it  is  quite 
essential  that  an  overplus  of  debits,  due  to  errors  or 
omissions,  be  diminished  by  a  red  ink  credit  in  the  debit 
column,  rather  than  by  a  regular  black  ink  credit,  which 
would  have  the  effect  of  showing  the  total  debit  larger 
than  it  was  in  fact;  this  applies  also  to  the  credit  side. 
An  example  of  this  can  be  understood  if  it  be  assumed 
that  the  adjustment  entr^^  on  line  19  appeared  in  red 
ink  instead  of  black  ink.  If  the  pencil  footing  just 
below  line  21  were  to  read  $122,248.66,  it  would  not 
properly  articulate  in  the  calculations  incident  to  a 
reconciliation  of  the  bank's  statement  or  ''balanced" 
pass  book.  The  addition  of  $1.00  in  the  correcting  entry 
makes  it  what  it  should  be.  Conversely,  if  the  error  had 
been  the  other  way  and  the  footing  $122,250.66  before 
the  correction  was  made,  it  still  would  be  *'out"  in  the 
bank  account  reconciliation  until  $1.00  was  deducted. 
If  the  $1.00  were   to  be   shown   on   the   debit   side   in 


84 


Factory  Accounting 


13 

6 


o 


P5 


Current  Exhibit  Entries  85 

black,  the  net  result  would  be  the  same,  but  the  totals 
would  show  the  bank  as  having  received  $1.00  more 
in  deposits  than  actually  happened. 


SuBsn)iAKY  Eecoeds 

While  this  book  is  so  arranged  that  all  entries  of 
any  kind  whatsoever  could,  if  desirable,  be  made  in  it, 
subsidiary  records  are,  for  obvious  reasons,  resorted 
to.  In  these  subsidiary  records  the  motive  is  centrali- 
zation of  data  along  lines  of  least  resistance;  entries 
can  be  classified  into  such  gToups  as  seem  advisable 
and  records  maintained  under  each  of  such  segregations, 
bringing  net  results  thereof  to  this  central  controlling 
record.  As  examples  of  these  we  have  Receipts  of  Cash 
(Figure  16),  Disbursements  of  Cash  (Figure  17),  Pur- 
chase Analysis  (Figure  19),  etc.,  which  are  in  fact  but 
outgrowths  of  certain  columnar  groups  of  the  General 
Exhibit  and  may  be  considered  like  subagencies  under 
a  general  agency. 

On  lines  6  and  11  appear  entries  of  Check  Eegister 
Sheets;  on  line  19  appears  a  correcting  entry  for  a 
hypothetical  error  in  the  Check  Register,  sheet  1. 
The  principal  controlling  accounts  involved  in  the  Check 
Register  are  the  Banks,  Accounts  Payable,  and  Discount 
on  Purchases;  by  reference  to  Figure  17  it  will  be  seen 
tbat  columns  are  provided  for  these,  making  it  but 
a  simple  process  to  copy  the  totals  of  the  columns  into 
the  General  Exhibit.  In  the  case  of  debits  and  credits 
of  groupings  other  than  here  mentioned,  the  items 
appear  (Figure  17)  in  an  ''Other  Accounts"  column 
and  are  analyzed  into  groups  to  fit  the  columnar  group- 
ing of  the  General  Exhibit.    This  analysis  is  more  fully 


86  Factory  Accounting 

described  in  Chapter  IX.  In  entering  such  analyses 
certain  items  may  be  totalized  if  desired,  but  it  is  more 
susceptible  of  a  quick  and  ready  audit  if  various  items 
are  clearly  shown.  As  for  instance  on  line  11,  in  the 
last  column,  appear  two  items,  $167.17  and  $237.19; 
these  could  be  shown  in  the  Exhibit  as  $404.36,  but  in 
any  future  checking-back  process  (with  Figure  17)  it 
would  be  annoying  to  determine  just  which  items  made 
up  the  $404.36,  particularly  as  the  $167.17  item  comes 
from  the  discount  column  and  the  $237.19  from  another 
place,   several   columns   away. 

On  line  9  appears  a  Purchase  Analysis  entry  in  con- 
nection with  Figure  19;  the  same  conditions  obtain  in 
connection  with  this  that  already  have  been  described 
concerning  the  Check  Register  Sheets.  Cash  Receipts 
Sheets  entered  on  lines  8,  26,  and  29  may  also  be  con- 
sidered in  this  category.  There  are  one  or  two  points 
in  addition;  on  line  9  the  Purchase  Analysis  show^s  an 
encroaching  entry  such  as  described  in  Chapter  VI; 
so  also  does  the  Cash  Receipts  Sheet  on  line  26.  On 
line  25,  in  connection  with  line  26,  appears  a  credit  in 
a  debit  column.  In  actual  practice  this  item  of  $4.05 
would  appear  in  red  ink,  a  common  method  for  showing 
a  credit  in  a  debit  column,  or  a  debit  in  a  credit  column. 
When  this  item  is  approached  in  footing  the  column,  the 
amount  is  subtracted  instead  of  added.  Another 
example  of  this  occurs  on  line  21  at  the  right-hand 
side  of  the  form. 

Labor  Cost  Summary  Sheets  (Figure  80)  may  possibly 
be  compiled  each  day  or  once  or  twice  each  week,  as 
conditions  in  individual  plants  may  seem  to  make  it 
expedient.  The  entry  in  the  General  Exhibit  may  be 
made  from  individual  sheets  or  may  be  accumulated 
possibly   on   weekly   summary   sheets    from   which   the 


87 

the  General 
of  a  single 
true  also  of 
s  shown  on 
lent  such  as 

the  General 
as  the  pro- 

d,  while  in 
it  the  close 
Bntry  of  an 
11  the  sheets 
id  had  been 
.  Production 
rms  in  use 
example  to 
3t  is  started 
?  each  day's 
s  of  produc- 
iod  of  four 

I  on  lines  24 
IS  with  the 
id  Country 
>  to  revenue 
cost  prices 
)  operating 
md  credits, 
>rds  of  this 
)nologically, 
ine  listings 
n  short-cut 
olved,  geo- 
ito.     Under 


PURCHASE  ANALY5[S,  Month  ot<2^/r'^-^^^    13] 6                                                               Z?SZZl-^Hl\.^tn^ 

Entry 
DAte 
/If- 

?                            Purchased  from 

Order     J  .2 

No.     ^^ 

fll  ^'*  « 

INVOICE 

1 

f 

>  i 

DEDUCTIONS 

PAYMENT 

STORETS 

ACCRUINS    EXPENSE                         || 

OTHER  ACCOUNTS          || 

D>T5 

Amount 

is 

reishf 

Acct  ||0lhtrlrm 

VouchtrNo. 

Ditc 

Fou 

rlir 

;r? 

^,„3 

^rei^i  |3"ppi'-" 

6ym-    M 

r"i"r,'g"''  COMtrC.I 

%r    Reserves 

Suspense 

Dr. 

Account 

tlf 

Ci-. 

^.H, 

3 

1 

<jA^dSA^^*^SLeut^  V-to.   ■«34*.d-**A  (V.*'-c^ 

^7^^ 

>/v 

»;Mni 

v/ 



«^<j 

2^^- 

a 

M- 

ZlHl        V 

^     ®^w. 

^, 

m 

J 

«/«/||| 

SfU^li 

^^ 

P!fe     - 

'.^1    ■ 

(  6£ 

y/^  'f?.  c^^Jr^^rrr'  ^ 

-t■-^-ri 

/    v'  <?^'a.v 

^. 

c 

!4. 

V 

l?li''«',a 

ffhOZ 

V- 

f" 

2S»o 

I! 

.5!^^ 

-f.' 

4 

^Is 

^rfejt. 

./ 

S-H-^-L 

7i' 

\ 

1*?; 

jroo 

,5 

I7i.»^ri,r5T7j1,'//^..r**<A:^    ^&<fe^ 

_ 

'h 

75;. 

v' 

V 

; 

5„. 

^_. 

fi 

z-7t8       V 

^ 

FilA 

y 

V 

y  V 

il  H 

7 

-S^X-^Tw?  Si  05a«^!^^:»s 

Z-tSi       */ 

^(mi 

i/^ 

?  =i^S|/S 

V 

^ 

y  V 

ir^imn 

1 

■M*i  1 

ft 

:;f«^  ii<>^U.,^>«^  (Sioic^t^j^  (S, 

Zi 

.oU. 

V 

?Sp 

,„, 

i;?7 

9 

fi^-fS^.-.rA'T.n  k  l..tW  (?           ' 

znio  </ 

fn^ 

V't 

2  .  2  f  no 

V 

V 

v«/ 

,2/jJslo. 

10 

-(Afi'yCff-v^^aU*  v^^^,  (^  -  (^A-oejiM-Ai^^ 

ilt<i 

_.ZZ[- 

V 

y 

W« 

JjSfcoll 

1 

Jl 

jtO-niL'^4    C<9A-t>^5''.^_, '^-'^^                                  ' 

2n,x      </ 

■J  f ,  15 

■^/■^ 

i!3Lr< 

^ 

v- 

-/  v/ 

!Mi 

fc,'*,' 

na^ 

\Z 

<«-<fcl;.  v^W^  Ji^^J^  & 

V:- 

z;»i2i 

• 

V- 

y  ^ 

!=4fi-'; 

13 

?r]<(&^J^^'^^  "•■X'PsXZ^ 

z-^it 

/    ^ 

V^ 

7.?f 

V 

V 

y  y 

]M« 

14 

(Xr  Jl<^^/  -^O,            ' 

■L-lfl 

J  3  0< 

y 

irt,Lo 

701 

15 

Tna^JUt^m  (3»^  >J^Ln^/<S^_ 

tis-i  V 

</ 

f.r: 

v- 

V 

j^ZS-c 

7(0 

16 

'Snlt  C/fc  i/^  C  ^'j*A,('  <i<L«/>L-„,.^j/ 

— 

-A 

~:uy^ 

^ 

iifi 

p^^ 

I  )lc 

oil 

17 

(7*.A'.  ;»1<t«/C'riL/ji-.^..^t^C5i> 

2-1^ 

^^ 

^ 

ZSnr 

y 

y 

"illiiUz 

-/,G 

n 

1-%'^A 

&!£ 

18 

^J.j^.^'CU^  Cf,.^  A,^  CS. 

^ 

V'^ 

^;no 

v' 

^ 

u-su 

?sfe<JI 

'If  ^ 

? 

13 

ow  ^^^«-^       '^ 

_ 

Yx 

y 

(^if^ 

^* 

^  s.  k\Ali  k 

I5„ 

-JiO 

^W^r 

f« 

JIU^     Si^3i 

5i     /e3 

20 

3..,r.'^  y,t,7nrf'<lU^  ?n  Ac«j.  dS. 

2-)fei"        >/ 

^Qy«9. 

y3 

izKloo 

^ 

y 

>f  r« 

feuT 

h 

s;< 

fe<^ 

ii 

/^^pt^^J/o-fi-.i-.V-  ^^I'^     ^AYo^-fco 

2.7*3 

Y" 

r^i 

y 

y 

I'T^ 

(}KdU*z-,*sVf-^ 

22 

%A^  S^..,i^;<^G>A,.t^(2-WW' 

Z74-, 

^A 

( 

35=<: 

v" 

y 

■tfttll 

/3Jo< 

^ 

•>  ^N 

a3 

.g',ivUii--'  -<//aA^  '^'trf'x.'^  Ca        ' 

y-r 

X  =  -f< 

y 

lio 

li^ 

J 

;»5 

S 

Z4 

©-wILj,(y>=Ks:(3/^ 

Z7?i- 

^r. 

y 

IK- 

iSi 

^ 

■s 

25 

y76-Tv<^  e  ^<^OuujeJ^j  Ca    (^ojCCo-*^ 

Z-J.f'?         </ 

>/ 

'/« 

tiSi 

y 

V 

y/ 

i?5i 

ll^  - 

^* 

i 

26    Uy-dXx^^sSctfTl-^  ^ti^S-  <?^ 

2.7m        V 

^PfLfi, 

V, 

f  i 

18  If 

v/ 

J 

y  y  J 

?S  I?  w^'il 

W^zbl/gll  1 

1 

27  ;?«*?narti;  (5 -WA/7«.„i^.;),^  ?;,.-:_ 

z7</<; 

Vr 

JSoo 

s/ 

r 

.^.4 

/fS« 

^'il 

28  Jnj^it^t^Lb^lt<^-(^^,  -ni^j, 

v.rfti:; 

^ 

f 

"a    1 

iS'Sl- 

'     2^^ 

29    VU<j:l^eM.     ^^icd^r^^L^^ 

nir^ 

v>^T'  ] ; 

tzil 

V 

V 

y  V 

f^ 

1/2  (1 

1 

1^   1 

30  j'JtTA.t.jei^  -mi^^c^rt^^ 

Z-jSl             , 

/     >/4f3. 

'As   1     !^^ 

ui  i£ 

V 

/v 

•J    V  , 

/ 

^fi 

v.iSlL^ 

/ 

/    II 

^'^ 

t^ 

/ 

T      / 

1 

li  =  H+^ 

S 

L 

:  :^m^    II 

ill? 

„t^    # 

.-JV^^ 

'J'P 

w^-'^-m 

3#hU 

i,C^ 

1 

t^ood 

^.^^44h^^. 

/ 

^^#1-1      1 

Th«  first  column  is  the  liate  on  whicU  the 
entrj'  i»  made  in  the  aoalysis,  while  fftrther 
over  under  the  heading  "Invoice,"  is  thowa 
the  dfttu  of  the  invoice.  The  second  column  ia 
for  the  Beller'a  uuine  and,  perhaps,  at  times, 
a  terse  exprefision  of  what  the  bill  covers. 
XiM  comes  the  "Order  No."  column,  followed 
hy  ''I'veiiLt  check-mark  columns  giving  infor- 
iiiiiiii.n  IIS  to  the  "delivery"  of  the  goods  and 
.■\;.imiK.d  as  follows: 

Point  Shipment,  mt'aning  that  the  goods  are 
eold  F.  0.  B.  at  the  point  they  are  shippr<I 
from.  If  goods  are  shipped  prepaid,  the  chargvi^ 
will,  therefore,  be  billed  to  the  buyer.  In  this 
ease  a  check  mark  will  also  be  placed  in  the 
"Prepaid"  column. 

Detfination.  meaning  that  freight  charges, 
if  not  prepaid,  will  be  allowed  as  a  propir 
deduction  upon  payment  of  the  invoice. 

Part  Wai/.  It  sometimes  happens  that  car- 
rying charges  will  be  allowed  as  far  aa  the 
B^<IIers  "free  zone"  extendi;  as  for  instance. 
a  shipment  from  New  York  to  Kansa«  City 
may  have  freight  charges  allowed  as  far  a« 
Cliicago,  the  buyer  absorbing  tho  costa  for  the 
rest  of  tlie  journey. 

Prepaid,  meaning  that  th«  f)hi]>pcr  has  pre- 
paid the  carrying  charges  but  not  necessarily 
that  he  will  not  bill  it  to  the  buyer. 

Deduct  Freight,  indicating  that  in  paying  for 
the  invoice  the  carrying  charges  arc  to  be 
deducted. 

rid,  meaning  the  railroad  or  express  com- 
pany over  which  the  goods  are  routed,  or  per- 
bapa  by  post. 


Fio.  19.— Pnrchai 


Current  Exhibit  Entries  87 

amounts  involved  may  be  transferred  to  the  General 
Exhibit.  Line  22  shows  a  typical  entry  of  a  single 
Labor  Cost  Summary.  The  same  thing  is  true  also  of 
Material  Cost  Summaries  (Figure  47),  as  shown  on 
line  28.  This  entry  involves  an  encroachment  such  as 
has  been  described  in  preceding  sections. 

In  some  plants  it  is  customary  to  enter  in  the  General 
Exhibit  all  Production  Eegister  Summaries  as  the  pro- 
duction orders  listed  thereon  are  finished,  while  in 
other  plants  a  summary  is  made  only  at  the  close 
of  the  month.  On  line  23  appears  the  entry  of  an 
interim  summary,  presumably  embodying  all  the  sheets 
up  to  that  point  where  the  orders  involved  had  been 
finished.  It  may  be  said  in  connection  with  Production 
Registers  that  the  wide  difference  of  forms  in  use 
makes  it  quite  impossible  to  select  a  typical  example  to 
fit  all  classes  of  production.  Bakery  product  is  started 
and  finished  within  twenty-four  hours ;  hence  each  day 's 
record  is  complete  in  itself,  whereas  the  class  of  produc- 
tion shown  on  Figure  20  may  cover  a  period  of  four 
months  or  even  more. 

An  interim  Sales  Summary  entry  is  shown  on  lines  24 
and  25,  the  first  line  being  the  transactions  with  the 
customers  and  showing  debits  to  City  and  Country 
Accounts  Eeceivable  respectively  and  credits  to  revenue 
accounts.  The  second  line,  involving  the  cost  prices 
of  the  articles  sold,  gives  debits  to  the  operating 
account  called,  ''Cost  of  Goods  Sold,"  and  credits, 
at  cost  price,  to  thf  Stocks  Account.  Records  of  this 
kind  are  much  mo/e  simple  to  compile  chronologically, 
as  they  usually  involve  only  adding-machine  listings 
of  manifold  invoice  copies  or  some  modem  short-cut 
plan  whereby  statistical  information  is  evolved,  geo- 
graphically,  territorially,    departmentally,    etc.     Under 


88  Factory  Accounting 

such  conditions  daily,  weekly,  or  monthly  entries  to  the 
General  Exhibit  may  be  made  as   desired. 

Types  of  Cross  Enteies 

The  first  entry  of  Figure  12  is  a  deposit  shown  on 
line  2.  In  the  practical  operation  of  the  General 
Exhibit  it  is  not  absolutely  necessary  to  give  an  entire 
line  across  the  page  to  the  entry  of  the  deposit  each 
day,  for  the  reason  that  the  cash  and  bank  columns 
are  in  juxtaposition  and  figures  entered  therein  are 
self-evident  of  their  purpose,  hence  a  deposit  entry 
of  the  same  date,  provided  this  other  entry  does  not 
use  the  deposit  column.  For  example  see  line  22,  where 
a  deposit  is  ''injected."  This  might  have  been  done 
with  economy  of  space  in  the  case  of  lines  5,  15,  18,  27, 
and  30.  Nor,  indeed,  is  it  absolutely  essential  that 
every  entry  on  a  line  be  of  the  same  date,  if  the  proper 
date  be  interlined  immediately  before  or  after  the 
figures  of  the  amount  of  the  deposit.  This  suggestion 
is  a  departure  from  theoretically  correct  practice  and 
is  only  allowable  as  a  measure  of  possibly  needed  econ- 
omy and  when  it  does  not  tend  toward  obscurity  in  any 
entry  to  even  a  slight  degree.  In  order  to  avoid  con- 
fusion of  the  entries  on  line  22,  the  amounts  having 
to  do  with  the  deposit  are  enclosed  in  parentheses,  not 
only  those  in  the  "Current  Cash — Cr."  cind  the  "Bank 
No.  1 — Dr."  columns,  but  also  the  exchange  amount 
in  the  '  *  Commercial  Costs — Dr. ' '  column  near  the  right- 
hand  edge  of  the  form. 

As  will  be  shown  in  chapters  following,  when  stores 
and  stocks  are  subjected  to  actual  physical  inventory 
and  "overs"  or  "unders"  are  found  to  exist  upon 
comparison  with  the  Stores  Ledger  accounts,  such  ledger 


89 

3al  facts. 

rbing  the 

v^ariation 

)wn  such 

f  of  sizes 

a   list   of 

The  indi- 

ye  charge 

^  account 

i  net  dif- 

fUg  Stores 

.le  amount 

f  belongs. 

.3  more  or 

,s  ^'contra 

.    parlance 

Iyer  and  a 

Kll  appear 

jedger  and 

:Settlement. 

tate  condi- 

;ies  of  this 

;g    of    each 

ir   his    own 

.edit  risk  is 

I  but  where 

an  up  both 

•n  on  line  4, 

stomer  and 

3h  an  entry 

jntry  to  the 

r  elsewhere, 
»ts,  which  is 


c 


Current  Exhibit  Entries  89 

accounts  must  be  made  to  agree  with  the  physical  facts. 
To  do  this  requires  an  adjusting  entry  absorbing  the 
differences  into  the  reserve  account  called  *' Variation 
of  Weights  and  Measures."  On  line  3  is  shown  such 
an  adjustment.  Let  us  suppose  that  a  number  of  sizes 
and  shapes  of  nuts  are  involved  and  that  a  list  of 
differences  has  been  compiled  (Figure  48).  The  indi- 
vidual Stores  Ledger  cards,  or  pages,  will  receive  charge 
or  credit  from  that  list,  while  the  controlling  account 
need  receive  but  the  one  item  embodying  the  net  dif- 
ference. In  the  exam^ple  this  is  done  by  crediting  Stores 
with  $69.40  and  charging  account  558  with  the  amount 
in  the  '' Reserves"  column,  where  it  properly  belongs. 

Under  any  plan  of  records  there  is  always  more  or 
less  nuisance  surrounding  what  are  known  as  ''contra 
accounts,"  which  in  ordinary  bookkeeping  parlance 
means  that  one  man  or  concern  is  both  a  buyer  and  a 
seller  and  that  in  consequence  an  account  will  appear 
in  both  the  Sales  Ledger  and  the  Purchase  Ledger  and 
must  by  some  means  be  merged  into  one  settlement. 
Some  concerns  who  are  in  a  position  to  dictate  condi- 
tions will  not  be  bothered  with  transfer  entries  of  this 
kind  but  insist  upon  the  regular  handling  of  each 
transaction;  i.  e.,  each  purchaser  pays  for  his  own 
purchases  in  money  or  check.  Where  no  credit  risk  is 
involved,  this  is  the  ideal  plan  to  follow,  but  where 
it  is  desired  to  make  a  settlement  and  clean  up  both 
accounts,  it  can  be  done  by  an  entry  as  shown  on  line  4, 
wherein  $75.42  is  credited  to  a  country  customer  and 
charged  to  an  "Account  Payable."  In  such  an  entry 
as  this  both  items  are  posted  from  this  entry  to  the 
various   individual   accounts   involved. 

The  discounting  of  a  note  at  the  bank  or  elsewhere, 
is  sometimes  recorded  on  the  Cash  Receipts,  which  is 


90  Factory  Accounting 

wrong  in  principle.  That  form  should  be  reserved  for 
collections  of  moneys  belonging  to  the  business,  which 
in  the  ordinary  course  of  events  passes  through  ''cur- 
rent cash."  Bank  discounts  do  not  pass  through 
''current  cash,"  and  technically  such  discounts  are 
never  received  like  cash  but  are  credits  given  by  the 
bank  against  which  the  manufacturer  may  draw  checks 
as  he  desires.  When  included  as  a  cash  receipt,  a  bank 
discount  creates  fictitious  statistics  where  monthly  totals 
are  considered,  unless  such  be  first  deducted,  which 
makes  unnecessary  work.  The  easier,  quicker,  more 
accurate  way,  and  in  fact  the  record  nearest  to  the 
exact  physical  facts,  is  as  sho\vn  on  line  7;  the  bank  is 
given  debit  for  the  net  amount  of  what  bankers  term 
the  "discount";  Notes  Payable  (511)  is  given  credit 
for  the  face  of  the  note;  and  the  interest  is  charged  to 
the  Interest  Account  (552)  under  "Eeserves"  under  a 
plan  more  fully  discussed  in  Chapter  XVIII. 

Figure  51  shows  a  defective  work  report,  which  is 
fully  explained  in  Chapter  XVI.  There  is,  however,  no 
special  form  shown  in  the  present  volume,  upon  which 
the  figures  from  these  reports  are  collated  or  sum- 
marized, as  usually  no  special  form  is  required  and  an 
adding  machine  strip  or  sheet  which  becomes  a  matter 
of  permanent  record  well  serves  the  purpose.  Line  10 
shows  the  entry  of  a  hypothetical  summary,  giving  credit 
to  "goods  in  process"  group  for  spoiled  work,  divided 
into  Material— $18.32  and  Labor— $11.08,  and  charging 
the  net  loss  to  Over,  Short,  and  Damage  (556) 
under  the  "reserves"  group.  In  practice  provision  would 
also  be  made  for  the  portion  of  overhead  applicable  to 
spoiled  work.  Line  12  shows  the  transfer  of  a  "doubtful" 
or  "desperate"  account  from  a  current  "Country  Ac- 
counts Receivable"  Ledger  to  the  Reserve  Account  for 
Bad  Debts  (568). 

Lines  13  and  14  show  an  adjusting  entry  in  a  matter 


Current  Exhibit  Entries  91 

over  whicli  there  may  possibly  have  been  considerable 
correspondence  pass.  Cross  entries  should  always  have 
sufficient  explanation  to  enlighten  those  who  are  entitled 
to  information.  Cold,  blind  entries  are  equally  as  exas- 
perating to  an  auditor  if  found  on  an  Exhibit  as  if  found 
on  an  ordinary  Journal.  In  this  instance  an  authority 
is  shown;  also  reference  is  made  to  existing  correspond- 
ence on  the  subject.  The  net  result  of  the  transaction 
is  that  the  customer  has  credit  passed  to  his  account, 
the  amount  $127.19  being  absorbed  in  Freight,  Express, 
and  Drayage — Outbound  (712)  in  the  "commercial  cost" 
group. 

Lines  16  and  17  show  an  entry  that  might  be  brought 
about  by  almost  any  reason  even  up  to  that  of  forcible 
seizures  of  the  goods  without  process  of  law.  The 
example  is  merely  to  show  the  acquisition  of  goods 
by  other  than  the  usual  routine  Purchase  Analysis 
(Figure  19)  entry. 

Lines  19  and  20  show  simple  entries  covering  adjust- 
ments of  errors  in  subsidiaiy  records. 

Line  21  shows  what  might  occur  if  a  number  of  long- 
standing small  credit  balances  had  been  carried  in  the 
*'City  Accounts  Receivable"  and  were  finally  closed  out. 
The  entry  passes  credit  to  Allowance  for  Bad  Debts 
(707)  in  the  "commercial  cost"  group.  Properly  this 
entry  should  show  in  the  "descriptive"  column  in  a  list 
of  the  customers  accounts  directly  affected  or  in  a 
reference  to  such  a  list  elsewhere. 

In  posting  analytical  ledgers  or  in  analyzing  expense 
items,  it  is  always  conducive  to  the  best  results  to 
work  from  the  General  Exhibit.  Take  for  example  the 
"Accruing  Manufacturing  Expense"  column;  the  first 
item,  $69.14,  coming  from  Check  Register,  sheet  1,  can 


92 


Factory  Accounting 


be  analyzed  by  reference  to  th^t  Check  Register  Sheet, 
after  which  the  $69.14  can  be  checked  with  a  clear,  full, 
ink  check  mark,  indicating  that  it  has  been  taken  care  of. 
In  like  manner  succeeding  items  can  be  handled,  and 


DEPARTMENT :  4- 

-    Material     ;    ,1  .50 
Lstor            10  .80 

Product*  14-5.50 
Af^t-er,a/    ^7.20 

i^sor-  ,  sa.7S 

OyfrAead'  3S.5$ 

Material  "  80 
L.bor  17  5S 
Overhead     I2  Z5^ 

Process      127.25 

M^ter/a/  SS.60 
L^6a^       f/.96 
Ov^rrhea<f    £3  70 

SpARTMENT2 

'Material       S.2o 
:   Labor      .^  a.6Q 
,    Ovetheaa     5..a5« 

Procei*      89.65 

Mare.ru/  47.80 
Labor-  £-^.40 
OverAfBcf     /7.-fS 

BEPARTMrtT .! 

MaterUI     ,38,60 
Labor        .iS.SO- 

Proc&ss     6  5.90 

/.aAo/-        JS.BO 
OverAe»J .  //.£0 

Fig.  21. — Diagram  Showing  Increase  of  Manufacturing  Costs  by 
Departments 

at  last  when  all  items  are  checked,  it  is  reasonably  sure 
that  the  analysis  will  articulate  with  the  synthesis. 
Where  original  entries  occur  on  the  Exhibit,  there  is,  of 
course,  no  need  for  reference  to  any  other  record  so 
long  as  symbol  numbers  are  present,  unless,  perhaps,  it 
be  to  an  authority  as  shown  on  lines  13  and  14. 

SUMMAEY    OF    ENTRIES 
(All  hypothetical  unless  otherwise  stated.) 


(704] 


Deposit 

Bank  No.  2 

Collection  Charges 

Current  Cash 

Line  3    (Figure  48) 
Inventory  of  Nut  Shed 

Reserve  for  Variation  of  Weights  and  Meas- 

ures    ( 558 ) 

Factory  Material  ( 74 ) 


3,620.10 
.90 


69.40 


$     3,621.00 


69-4(? 


Current  Exhibit  Entries  93 

Line  4 
Cross  Entry 

Accounts   Payable 75.42 

A  Country  Customer 75.42 

Line  5 

Bank  Xo.  1 7,49L53 

Collection  Charges    ( 704) .65 

Current  Cash 7,492.18 

Line  6 

Check  Register,  sheet  1 

Stores 64L38 

Manufacturing  Expense 69.14 

Accounts   Payable 22,104.28 

Accrued  Labor 9,642.84 

Bank  No.  1 9,628.83 

Bank  No.  2 22,418.62 

Discounting  Purchases  ( 907 ) 410.19 

Line  7 

Bank  No.  1 49,250.00 

Reserve  for  Interest  ( 552 ) 750.00 

Notes  Payable   ( 511 ) 50,000.00 

Line  8 

Cash  Receipts,  sheet  1 

Current  Cash 1,242.89 

City  Customers 302.21 

Country  Customers 940.68 

Line  9    (Figure  19) 

Purchase  Analysis,  page  14 

Foundry  Material  (70) 11,099.69 

Woodworking  Material    (72) 5,067.75 

Factory  Material  ( 74 ) 21,675.31 

Supplies    (76) 159.20 

Manufacturing    Expense 3,219.19 

Material  in  Process 7.50 

Labor  in  Process 34,921.18 

Equipment    950.00 

Suspense    ' 525.75 

Assets 9,875.00 

Reserves 260.00 

Commercial  Costs 645.20 

Accounts   Payable 50,342.67 

Accrued  LaboT 38,063.10 


94  Factory  Accounting 

Line  10 

Reserves  for  Ch'er,  Short,  and  Damage  (556)  . .  29.40 

Material  in  Process 18.32 

Labor  in  Process 11.08 

Line  11   (See  Figure  17) 
Check  Register,  page  3 

Country  Accounts  Receivable 50.00 

Stores 52.97 

Manufacturing  Expense 3,219.00 

Equipment 80.00  200.00 

Suspense    915.00 

Assets    6,500.00 

Notes  Payable   (510) 55,000.00 

Accounts   Payable 13,244.59 

Accrued  Labor 38,063.10 

Reserves 72.50 

Commercial  Costs 627.19 

Bank  No.  1 112,619.83 

Bank  No.  2 4,600.16 

Discounting  Purchases  (906) 167.17 

Sales  of  Raw  Material   ( 901 ) 237.19 

Line  12 

Reserve  for  Bad  Debts  (568) 42.30 

A  Country  Customer 42.30 

Lines  13-14 

Freight,  Express  &  Drayage — Outbound  (712)  127.19 

A  Country  Customer 127.19 

Line  15 

Bank  No.  2 11,812.13 

Collection  Cost  (704) 1.40 

Current  Cash 11,813.53 

Lines  16-17 

Woodworking  Material    (72) 248.30 

A  City  Customer 248.30 

Line  18 

Bank  No.  1 15,500.20 

Current  Cash 15,500.20 

Line  19 

Factory  Material   (74) 1.00 

Bank  No.  1 1.00 

Line  20 

Factory  Material   (74) 9.25 

Accounts  Payable 9.25 


Current  Exhibit  Entries  95 

Line    21 

Accounts  Receivable .92 

Discount  Allowed   ( 705 ) .92 

Line  22 

Bank  No.  1 10,619.27 

Collection  Costs  ( 704 ) 1.65 

Current  Cash 10,620.92 

Line  22   (Figure  80) 

Labor  Cost  Summary,  page  19 

Manufacturing  Expense 1,545.35 

Labor  in  Process 9,709.15 

Accrued  Labor 11,254.50 

Line  23 

Production  Register  Summary,  page  19 

Finished   Parts    (82) 16,432.19 

Finished  Product    (84) 64,281.14 

Reserve  for  Maintenance    (562) 1,328.92 

Material  in  Process •  24,289.62 

Labor  in  process 1 . . .  33,618.85 

Expense  in  Process 24,133.78 

Line  24 

Sales  Summary  Sheet,  page  129 

City   Customers 13,642.81 

Country    Customer 28,439.60 

Revenues    42,082.41 

Cost  of  Goods  Sold 23,647.18 

Stocks    23,647.18 

Line  26   (Figure  16) 

Cash  Receipts  Sheet  3  , 

Current  Cash 38,684.21 

Accounts   Payable 125.00 

Manufacturing  Expense 500.00  4.05 

Reserves 550.00  116.25 

Commercial  Costs 44.81 

Discount  Allowed    (704) 226.09 

City  Customers 1,483.94 

County    Customers 10,612.52 

Suspense 27.60 

Assets    5,862.50 

Revenues   22,023.25 

Line  27 

Bank  No.   2 749.36 

Collection  Costs    (704) .20 

Current  Cash 749.56 


96  Factory  Accounting 

Line  28  (Figure  47) 

Material  Cost  Summary,  page  16 

Manufacturing  Expense 962.14 

Material  in  Process 42,094.71 

Foundry  Material  (71) ! 6,918.12 

Woodworking  Material   ( 73 ) 3,328.75 

Factory  Material    (75) 9,413.28 

Supplies     ( 77 ) 962.14 

Raw  Castings  ( 81 ) 8,642.32 

Finished  Parts    (83) 13,792.24 

Line  29 

Cash  Receipts,  sheet  4 

Current  Cash 9,643.12 

Collection   Costs    (704) 142.12 

City  Customers 7,279.07 

Country  Customers 2,506.17 

Line  30 

Bank   No.    1 1,600.02 

Current  Cash 1,600.02 

Totals $593,929.78     $593,929.78 


Discount 

i/sr 
pp/cp- 
/oo% 

t  Profit 
.3?;25 

/VPr6Mf 
P/?/C£ 
30% 

Commercial 
09.25  ■ 

ror/iL 
cosr 

6776% 

Overhead 
1  i.85 

p4cro/?y 
cosr 

4^.60% 

■^/laterial 
::;ja07:,. 

P/?/M£ 

cosr 

36.667o 

Fig.  22. — Diagram  Showing  Increase  of  Manufacturing  Costs  by  Elements 


Current  Exhibit  Entries  B7 

LNTKRrai  Statemestts 

One  of  the  main  features  of  the  General  Exhibit  is 
to  produce  or  display  that  which  its  name  implies — 
a  general  exhibit  of  the  affairs  of  the  business  as  time 
proceeds.  Under  all  but  most  extraordinary  circum- 
stances, or  where  routine  work  is  behind,  a  daily  report 
can  be  laid  upon  the  manager's  desk  each  day,  before 
noon,  embodying  the  figures  of  the  previous  day's 
entries.  This  is  accomplished  by  bringing  down  pencil 
footings  after  the  manner  shown  immediately  under 
line  21.  Where  any  of  the  subsidiary  records  are  but 
partially  filled  and  are,  therefore,  not  in  such  state  or 
condition  as  to  be  entered  on  the  General  Exhibit,  they 
can  be  pencil-footed  and  on  the  daily  report  treated  as 
though  actually  entered  on  the  Exhibit  by  combination 
with  the  Exhibit  footings.  This  will  present  prac- 
tically a  ''going"  balance  sheet  of  the  business. 

Proof  of  accuracy  should  be  first  tested  on  the  adding 
machine,  perhaps  after  the  manner  of  the  list  on  page  72 
(Figure  13),  taken  from  footings  under  line  21  on  an 
adding  device  which  is  equipped  to  add  two  columns 
independently  at  the  same  time. 

This  expedites  matters  and  reduces  to  the  minimum 
the  probability  of  annoying  corrections  in  the  subsequent 
use  of  the  figures.  In  a  machine-ruled  book  where 
debit  columns  have  blue  "down-lines"  and  credit 
columns  have  red  ''down-lines,"  it  is  not  necessary  to 
look  up  to  a  column  heading  to  determine  whether  an 
amount  should  be  listed  in  the  upper  counter  or  the 
lower  counter  of  the  duplex  adder,  as  the  color  of  the 
column  lines  will  indicate  it  instantly.  In  the  adding 
machine  strip  (Figure  13)  it  will  be  noticed  that  the 
items  are  listed  as  they  appear  in  order,  laterally  across 


98 


Factory  Accounting 


o 

- 

N 

■^ 

+ 

U) 

(0 

^ 

O 

S) 

O 

- 

~ 

? 

* 

« 

£ 

^ 

o 

2 

o 

(X 

•0 

~ 

to 

(X 

n 

« 

CM 

i5 

• 
>2 

J 

2, 

o 

c 

o 

o 
o 

u. 
0, 

c 
n: 

o 
S 

F 

0) 

c 
o 

die 
71^ 

U>1 

■ 

i| 

L 

zil 

ill 

0. 

I§ 

w  'si 

Oil 

1 

o 

- 

(M 

•O 

+ 

m 

>o 

N 

CO 

91 

0 

- 

(M 

^ 

\n 

5 

- 

lO 

0 

; 

s 

::: 

•*- 

:c 

s 

>^ 

s 

s 

o 

/fl 

4 

( 

^ 

1 

1 

0 

Current  Exhibit  Entries  99 

the  folio  of  the  Exhibit,  the  debit  footings  being  listed 
in  the  upper  counter,  which  has  no  special  indication, 
and  the  credit  footings  being  listed  in  the  lower  counter 
which  is  indicated  by  (  ^ )  a  small  solid  square  under- 
lined. In  the  totals  the  upper  counter  has  a  line  above 
the  star  (^),  and  the  lower  counter  shows  a  similar  line 
below  the  star  (;^). 

The  daily  report  shown  in  Figure  14  consists  of  a 
master  sheet  and  a  slip  sheet  so  placed  as  to  fit  exactly 
the  spacing  of  an  unlimited  split  duplex  adding  machine, 
to  the  end  that  the  slip  sheet  may  be  filled  out  on  the 
adding  machine.  On  the  master  sheet  appear  the  type- 
written names  of  the  accounts  or  groups  of  accounts 
of  the  General  Exhibit.  On  the  slip  sheet  appear  the 
figures.  Together  they  may  be  made  to  give  as  com- 
plete a  report  of  the  business  as  desired,  the  plan  per- 
mitting expansion  or  contraction.  To  accomplish  this 
the  master  sheet  having  been  prepared  with  the  selected 
list  of  accounts  is  folded  as  indicated  in  the  illustration, 
and  the  daily  slip  sheet,  when  supplied  with  figures,  is 
placed  in  this  fold.  Used  with  the  master  sheet,  the 
record  is  intelligible  to  anyone.  Without  the  master 
sheet,  the  slip  sheet  is  absolutely  meaningless.  Should 
it  fall  into  alien  hands,  it  tells  nothing;  but  to  him  who 
possesses  a  duplicate  of  the  master  sheet  or  a  knowl- 
edge of  its  arrangement,  the  slip  sheet  becomes  at  once 
an  open  book,  giving  in  umnistakable  terms  all  the 
information  intended  to  be  conveyed.  The  slip  sheet  is 
punched  for  permanent  filing  in  a  post  binder.  This 
plan  is  exceedingly  advantageous  where  daily  reports 
are  sent  from  one  office  to  another,  as  in  the  case  of  a 
branch  office  or  where  an  official  not  present  at  the  plant 
desires  close  touch  with  the  affairs  of  the  concern. 

The   figures    selected   for   the   illustration   are   those 


100  Factory  Accounting 

appearing  at  tlie  bottom  of  folio  2  of  the  General  Exhibit 
(Figure  12).  In  the  "totals-to-date"  group  (Figure  14) 
it  can  be  seen  that  the  figures  compare  exactly.  The 
*' Balance"  column  shows  the  net  difference  between 
the  debits  and  the  credits  of  each  item  listed  under 
*' Totals  to  Date."  Having  these  three  columns  as 
shown,  enables  the  recipient  to  make  calculations  and  to 
draw  conclusions  of  his  own  from  his  successive  daily 
report  sheets  by  taking  cognizance  of  the  items  under 
"Totals  for  Day."  In  many  instances  where  a  close 
check  of  accuracy  is  desired  at  a  place  geographically, 
or  otherwise,  separated  from  the  General  Exhibit  and 
its  subsidiary  records,  these  daily  sheets  are,  in  turn, 
entered  in  a  record  devised  for  the  purpose  of  showing, 
chronologically,  progressive  and  statistical  information. 
In  the  columns  ** Totals  for  Day"  (Figure  14)  the 
amounts  will  not,  in  every  case,  agree  with  items  shown 
in  the  Exhibit  under  date  of  February  18.  This  is  for 
the  reason  that  in  the  case  of  Cash  Receipts,  sheet  4 
(line  29  of  Exhibit),  the  amount  $9,643.12  was  not  all 
received  on  the  date  of  February  18,  and  that  hypothetic- 
ally  $8,043.10  of  it  was  from  previous  pencil  footings 
on  the  Cash  Receipts  Sheet,  included  in  a  previous  day's 
report.  The  figures  correlated  to  the  latter  amount  then 
must  have  been  as  follows: 

City  Customer— Cr $6,614.12 

Country    Customer— Cr 1,538.98     $8,153.10 

Discount  allowed 1 10.00 

Net  Cash  Received g.^.043.10 

In  the  case  of  the  Material  Cost  Summary  shown  on 
line  28,  there  would  not  be  the  same  need  for  interim 
information  as  in  the  case  of  cash  received,  which  is 


Current  Exhibit  Entries  101 

quite  often  df  rital  importance.  Material  transfers 
involve  conditions  that  forty-eight  hours,  on*  way  or 
another,  do  not  deeply  a:ffect  so  far  as  exact  financial 
conditions  are  concerned.  Whether  $100.00  in  material 
is  shown  under  ''Stores"  or  under  ''Material  in  Proc- 
ess" is  of  scant  importance  under  ordinary  conditions. 
Hence  material  cost  summaries  shown  once,  or  twice, 
each  week  is  sufficient.  In  large  plants  there  usually 
are  enough  data  accumulated  daily  to  make  a  daily 
material  surmnary  expedient. 

Interim  footings  on  Labor  Cost  Summaries,  Check 
Begister  Sheets,  and  Sales  Summaries  should  be  shown 
daily,  but  in  this  particular  example  it  was  not  conven- 
ient to  feature  them. 


CHAPTER  VIII 

CLOSING  THE  GENERAL  EXHIBIT 

Oeder  of  Entries 

Figure  15  represents  folio  3  of  a  General  Exhibit 
record,  showing  the  footings  brought  forward  from  folio 
2  (Figure  12),  and  also  the  figures  from  certain  hypo- 
thetical subsidiary  records  and  two  figures  from  illus- 
trations  (Figures  19  and  84). 

There  is  no  fixed  order  of  precedence  in  making  clos- 
ing entries,  save  only  for  the  last  two  entries,  namely, 
the  entry  of  Expense  Distribution  Sheet  totals  and  the 
transfer  of  cost  and  revenue  totals  to  the  '*  Private 
Ledger"  group  of  columns.  These  exceptions  are  for  the 
reason  that  the  preceding  closing  entries  on  the  folio 
are  all  quite  likely  to  affect  either  one  or  both  of  the 
last  two  entries,  hence  the  precaution  necessary  to 
know  first  positively  that  all  closing  items  are  entered 
before  taking  the  last  final  step. 

Sales 

On  lines  2  and  3  appear  totals  from  a  hjrpothetical 
Sales  Summary.  The  exact  form  of  a  Sales  Analysis  is 
not  shown  in  the  present  volume,  owing  to  the  wide 
divergence  of  plans  for  such  employed  in  present-day 
accounting.  In  the  range  from  the  old-fashioned  and 
laborious  pen  entries  in  bound  books  to  the  latter-day 
adding-machine    lists    drawn    from    carbon    copies    of 

102 


Closing  the  General  Exhibit  103 

invoices,  there  are  many  good  methods  and  some  poor 
ones.  The  exact  method  employed  is  of  little  conse- 
quence to  the  use  being  considered  in  the  present 
examples,  so  long  as  the  figures  are  quickly  obtainable 
at  the  close  of  the  month. 

Aside  from  the  amount  of  the  sales,  this  Exhibit  entry 
involves  the  recording  of  the  cost  of  the  goods  sold.  The 
means  of  arriving  at  such  figures  vary  with  the  prod- 
uct. In  some  companies  the  carbon  copy  of  the 
invoice  is  priced  at  cost  price  opposite  each  individual 
item  and  the  total  thereof  is  listed  either  by  adding 
machine  or  by  some  other  method  whereby  a  grand 
total  may  be  arrived  at.  In  others  a  tally  sheet  is  main- 
tained whereby  quantities  are  tallied  for  each  different 
item  of  product;  at  the  end  of  the  month  these  tally 
marks  are  counted  and  the  amount  thereof  multiplied 
by  the  cost  price  of  the  article,  and  later  these  extensions 
are  summarized  to  arrive  at  a  grand  total  of  cost  of 
goods  sold. 

In  certain  large  companies  where  automatic  sorting, 
listing,  and  adding  devices  are  used  in  connection  with 
perforated  cards  (Figures  35,  36,  and  37)  embodying 
data  concerning  sales,  costs,  product,  commissions  terri- 
tories, etc.,  it  is  a  very  simple  matter  to  arrive  at  totals 
of  not  only  revenues  and  costs,  but  also  a  fixed  classifica- 
tion of  such  by  sales  territories,  individual  salesmen, 
classes  of  customers,  classes  of  product,  etc.  While  these 
devices  are  used  almost  entirely  by  concerns  having  a 
very  large  volume  of  work,  it  is  possible  for  smaller 
concerns  to  make  use  of  written  cards  in  the  place  of 
perforated  or  punched  cards  and  to  ''hand-sort"  the 
cards  for  compilations  on  a  listing  adding  machine 
equipped  for  sheets  that  can  be  put  in  a  permanent 
binder,  thus  accomplishing  by  hand,  assisted  by  hand- 


104 


Factory  Accounting 


J 

o 
"to 

a 

c 

o 

+^ 
o 

o 

>-^ 

E 

1 
d 

c 

o 

"v) 

> 

3" 

o  1 

21 

sa 

t= 

3= 

=1 

=j 

= 

=3 

e=i 

= 

=ac 

= 

E= 

rx: 

:ss 

nn 

= 

F= 

IX  - 

°-  5 
>/)  « 

O   i 

u_ 

mJJ- 

— 

1 

' 

__. 

■■■ 

[ 

'"  ' 

h^ 

■ 

' 

.. 

- 

~ 

— 

^ 

1 ^ 

Z 
Id 

5 

UJ 

-J 
u 

z 

Z 

z 
z 

a 
w 

> 

c 

lO 
Q 

E 
o 

o 

to 

D 
^2 

TJ 

■4) 

J) 

(0 

i! 

3 

a 

It) 

c 

0 

■^5 

o 

c 
■q 
^/) 

(M 

o 

c 

1 

00 

u 

> 
0 
a- 

> 

C 
Q 

c 
u 

> 

c 

c 

"c 

c 
'E 

J) 

.•0 

c 

0 
cr. 

3 

0; 

> 

0 

•♦— 

16 
% 

I. 
(0 

r 

s 

+- 
-+- 

0 

> 

il 

C 

'S 

) 

0 

N 

1 

I 

1 

i 

1 

Q-1 

21 

— 

— 

— ' 

1 

-^ 

— ' 

— 

— 1 

— 

-^ 

— 

— 1 

, 

Si 

' 

is 

1^ 
O   c 



z 

UJ 

2 

kJ 
-J 
U 

_i 
o 
o 

vD 

Z 
(U 

o 
u 

0 
0 

IT 

0 

c 

1- 
• 

c 

3 
-0 

•o 

c 

c 
£ 
t> 
a 
0 

> 

0 

.  o 
(0 

) 

c 
'> 

I. 

D 

1 

£ 

c 
1* 

'■cr 

c 

) 

t)i 

C 

c 

0 

V 

c 

0 

0 

1 

c 

■a 

I. 

6 
0 

c 

)  c 

i 

0 

0 

a 
0 

c 

"io 
(£1 

1 

■5 

0 

■f- 

E 
0 
0 

0 

L 
0 
X 
0 

a. 

L 
i. 

3 

1 

0 
\ 

>3 

« 
I) 

>5 

1 

1 

■5 

» 

^ 

0 

^ 
•^Q 

€ 

1 

^ 

1 

» 

Ph 


a 
s 

3 


Closing  the  General  Exhibit  105 

operated  machinery,  that  which,  beyond  the  original 
punching  of  the  cards  by  hand,  is  done  in  the  large 
concerns  entirely  by  machinery.  With  the  General 
Exhibit  in  use  such  mechanical  aids  are  safeguarded 
and,  when  properly  installed,  become  efficient  servants. 
On  line  4  appears  the  total  of  goods  returned  by 
customers;  this  item  is  deducted  from  sales  by  a  red- 
ink  debit  (in  a  manner  previously  discussed),  in  order 
that  the  net  revenue  may  appear.  As  a  matter  of  sta- 
tistics these  returns  are  kept  somewhere  chronologically, 
and  usually  where  graphic  charts  are  employed,  a 
"graph"  is  kept  for  such  return  sales,  showing  the  per- 
centage of  returns  to  total  volume  sold.  In  the  case 
of  the  manufacturing  cost  of  goods  returned  by  cus- 
tomers, in  this  illustration,  a  hypothetical  deduction  has 
been  made  from  the  amount  involved  in  the  total  cost  of 
goods  sold,  as  shown  on  line  3. 

Purchases — Material 

The  Purchase  Analysis  (Figure  19)  is  more  fully  dis- 
cussed in  Chapter  X,  but  mention  is  made  of  it  in  the 
present  connection  to  say  that  the  entry  on  line  5  pre- 
supposes the  use  of  a  Purchase  Analysis  Sheet  as  a 
summary  sheet  for  a,ll  in  dividual  sheets  in  the  month 
and  the  transferring  of  the  grand  total  therefrom  to 
the  closing  folio  of  the  Exhibit.  This  hypothetical  sum- 
mary would  not,  of  course,  include  sheet  14  entered 
on  Exhibit,  folio  2,  on  line  9,  as  an  example  of  the 
individual  entry  of  Purchase  Analysis  Sheets.  The 
author  expresses  no  choice  of  plans  in  the  absence  of 
specific  information  as  to  exact  conditions  of  use;  a 
choice  is  largely  a  matter  of  personal  preference  based 
on  existing  conditions. 


106 


Factory  Accounting 


J 

.0 
*o 

TO 

1 
0 

0 

to 

b- 

U-l 

(=:>. 
Di 

-"1 

1 

rn 

1 — 1 

1 

1 — 1 

1 — 1 

1 

■*■  ■  ■ 

tt: 

8 

-0 

X 

— 

■0 
0 

X 

1 

■ 

III 

z 
0 

^- 
0 

D 
D 
0 
CC 
Q. 

■f- 

0 

u 

' 

4 

1. 

>- 

' 

' 

^^  " 

Z 

S 

X 

z 

J, 
.1 

a. 
0 

a 
(0 

u 

■0 

c 

CD 

1- 
0 

}u 

3 

en 

1 
t 

> 

X 

UJ 

*- 
in 

<s 

S- 

0 

? 
■  0 

flL 

1 

ft) 

i 

1 

s 

0 

or 

UJ 
DC 

1 

-a 

-0 

c 
« 

-c: 
10 

tj 

c 
0 

£ 

£ 
< 

u 
0 

? 

x: 

«5 

C 
X 

C 
0 

u 

C 

cr 

0. 

-1 

•5 

c 

1 

0 

3 

S 

a 

X 

lU 

5 

1 

-I. 

Q 
sx 

UJ 
Q. 

0 
0 

"O 

1 

' 

'     ^ 

— 

— 

* — 

— 

1 

T3 

J) 

z 

0 

h 
0 

D 
0 

tr 

Q. 

1 

0 

■0 

« 

>- 

_LJ_ 

' 

i 

lU 

S 

UJ 

_l 

Ui 

z 

UJ 

irffli 
XS 

1 

0 

Of 

r 

<>|<D 

E 
-3 

■^ 

E 
< 

"(1 

1 

io|co 

4 

■sz 

i)K 

r 

0 

£ 

J 

io|<o 

c 

c 
to 

in 

'a 

z: 
5 

e 
< 

-c 

1 

lU 

1 

t3 

c 

C 
0 

e 

« 

'£ 

c 
0 

s 

2 

0 

0 

c 

.J 

i2 

1 

1 

■1 

1 

1 
J 

• 

u 

_J 

( 

• 

-™' ' 

Closing  the  General  Exhibit  107 

Returned  purchases,  as  shown  on  line  6,  involve  prac- 
tically the  same  conditions  as  that  of  returned  sales,  but 
conversely. 

A  material  summary  sheet  appears  on  Exhibit,  folio 
2  (Figure  12),  and  represents  page  16.  A  second  sum- 
mary sheet,  page  23,  appears  on  line  7  of  Exhibit,  folio 
3.  These  sheets  are  usually  entered  in  the  Exhibit  as 
often  as  they  are  compiled ;  hence  sheets  17  to  22  inclus- 
ive are  presumed  to  have  been  entered. 

In  cases  where  automatic  sorting  devices  are  employed, 
it  is  quite  usual  to  have  material  issuances  punched  on 
individual  cards  (Figure  37),  in  which  case  each  day's 
cards  can  be  sorted  and  tabulated  and  the  results  entered 
on  the  Exhibit  as  a  daily  routine.  This  use  is  more  fully 
discussed  under  Chapters  XI,  XV,  and  XVI. 

Peoduction  Register 

On  line  8  appears  the  entry  of  the  Production  Reg- 
ister, sheet  93  (Figure  20),  as  an  example  of  the  entry 
of  an  individual  sheet.  On  line  9  appears  what  purports 
to  be  a  summary  of  sheets  94  to  98  inclusive.  So  far 
as  the  use  of  the  summary  idea  is  concerned,  the  same 
condition  obtains  in  this  case  as  is  discussed  under  the 
handling  of  purchases  in  a  preceding  paragraph. 

There  are  several  different  types  of  Production  Reg- 
isters in  existence,  and  also  there  are  entirely  different 
plans  for  recording  production;  hence  the  references 
shown  are  not  by  any  means  the  only  way  that  figures 
can  be  supplied  for  the  closing  of  the  Exhibit,  yet  what 
appears  on  lines  8  and  9  can  be  considered  as  fairly 
typical  of  appearance,  irrespective  of  the  exact  avenues 
of  original  entry  routine. 


108  Factory  Accounting 

SUSPSNSB    AND    ReSEEVE    ItEMS 

On  lines  10,  11,  12,  and  13  appear  what  purports 
to  be  monthly  apportionments  taken  from  items  held  in 
''suspense,"  as  shoA\Ti  under  Group  K  in  the  chart 
of  accounts,  Figure  9.  On  lines  14  to  23  inclusive, 
appear  the  monthly  reservations  to  be  charged  to 
Expense  and  set  up  as  credit  for  purposes  outlined 
under  Group  N  of  the  chart  of  accounts. 

While  these  various  items  have  been  individually  dis- 
played on  folio  3  of  the  General  Exhibit  for  purposes 
of  discussion,  it  is  not  necessary  to  display  them  each 
recurring  month.  Instead  a  simple  entry,  embodying 
both  the  "suspense"  and  ''reserve"  items  or,  perhaps 
better  yet,  a  line  for  each  of  the  "suspense"  items  and 
the  "reserve"  items,  can  be  given  on  subsequent  closing 
folios.  Such  an  entry  or  entries  can  read  in  effect, 
"Reserve  items  as  displayed  on  Exhibit,  folio  3"  and 
show  one  total  therefor;  in  each  case  this  total  will 
agree  with  the  total  of  the  summaries  of  "suspense" 
and  "reserve"  items  shown  on  the  Expense  Analysis, 
Figure  83.  Or  again  the  entry  can  be  made  on  the 
Exhibit  with  a  reference  to  the  various  and  several  sep- 
arate summaries  sho^^Ti  on  Figure  83,  as  for  instance, 
"reserves  for  maintenance,"  "reserves  for  deprecia 
tion,"  "commercial  reserves,"  and  "suspense  items." 

Expense 

Line  24  shows  a  blanket  entry  embodying  commissions 
due  to  salesmen.  In  certain  cases  commissions  are  sum- 
marized from  punched  cards  after  the  manner  discussed 
under  sales,  in  a  preceding  section  of  the  present  chap- 
ter.    In  other  cases  there  are  no  connnissions,  as  all 


Closing  the  General  Exhibit  109 

sales  are  handled  by  strictly  salaried  men.  Hence  in  the 
item  of  commissions  it  will  be  understood  that  an 
Exhibit  entry  can  be  made  daily,  weekly,  or  monthly 
and  from  whatever  source  seems  most  convenient  or 
advisable  in  the  individual  case  where  the  Exhibit  is 
to  be  installed. 

The  Expense  Distribution  Sheet  (Figure  84)  is  shown 
on  line  25.  This  involves  merely  a  copying  of  column 
totals  into  the  corresponding  columns  of  the  Exhibit. 
It  may  be  said  at  this  point  with  all  possible  emphasis 
that  when  segregations  as  shown  on  Figure  84  are  had 
for  any  particular  business,  the  longest  leg  of  the  jour- 
ney in  the  search  for  actual  costs  will  have  been  covered; 
w^hether  a  concern  goes  into  the  minutia  of  detail  cost 
finding  or  not,  it  has  some  sound  facts  at  its  disposal 
when  it  has  its  expense  carefully  segregated  to  depart- 
ments and  brought  into  a  General  Exhibit  as  here  shown 

The  entry  of  the  Expense  Distribution  Sheet  serves 
to  clear  the  ''Accruing  Manufacturing  Expense"  column 
of  all  its  debits.  This  is  done  by  a  red-ink  entry,  as  pre- 
viously explained,  and  is  indicated  in  the  example  by  a 
ringed  black  amount  in  the  absence  of  red  ink. 

In  like  manner  the  final  transfer  entries  on  lines  26,^ 
27,  and  28  clear  the  columns  of  the  ' '  operations ' '  group. 

Summary  of  Entbies 

(All  hypothetical  unless  otherwise  stated.) 

Lines  2-3 

Sales  Siuninary,  sheet  130 

City  Customers $  34,107.02 

Country  Customers 56,879.20 

Revenues    $  90,9d6.22 

Cost  of  Goods  Sold 52,647.19 

Stocks    52,647.19 


110 


Factory  Accounting 


Closing  the  General  Exhibit  111 

Line  4 

Returned  Goods  Summary,  page  131 

Revenues    3,956.33 

City  Customers 1,827.19 

Country  Customers 2,129.14 

Line  5 

Purchase  Summary,  page  18 

Foundry  Material 19,242.76 

Woodworking    Material 6,091.04 

Factory    Material 47,642.28 

Supplies 347.19 

Manufacturing    Expense 6.247.19 

Equipment     3,147.75 

Suspense    619.84 

Assets     4,267.04 

Reserves 498,12 

Commercial  Costs 1,906.80 

Accounts   Payable 90,010.01 

Line  6 

Returned  Purchases,  page  19 

Accounts   Payable 1,579.71 

Raw  Stores 1,329.87 

Manufacturing  Expense 249.84 

Line  7 

Material  Summary,  page  23 

Manufacturing  Expense 127.19 

Material  in  Process 18,133.29 

Foundry  Material   ( 71 ) 3,214.28 

Factory  Material    ( 75 ) 5,618.07 

Finished  Parts  (83) 9,428.13 

Line  8    (Figure  20) 

Production  Register,  page  93 

Finished   Parts    (82) 25.63 

Material   in  Process 8.12 

Labor    in    Process 8.25 

Expense  in  Process fl.26 

Line  9 

Production  Register  Summary,  sheet  98 

Finished  Parts    (82) 18,458.34 

Finished  Product    (84) 24,319.85 

Experimental  Work   (140) 320.40 

Equipment     1,684.13 


112  Factory  Accounting 

Maintenance   927.16 

Parts  in  Process 13,821.09 

Material  in  Process 3,111.32 

Labor  in  Process 12,349.55 

Expense  in  Process 16,427.81 

Line  10 

Insurance    ( 134 )    180.00 

Insurance  in  Suspense    (451 ) 180.00 

Line  11 

Printing  and   Stationery    ( 184) 75.00 

Suspense    ( 452 ) 75.00 

Line  12 

Advertising     (708) 500.00 

Suspense    ( 455 ) 500.00 

Line  13 

Professional    Service    ( 145 ) 100.00 

Suspense   (457) 100.00 

Line  14 

Taxes  (133) 650.00 

Reserve    ( 551 ) 650.00 

Line  15 

Interest   ( 135 ) 6,434.25 

Reserve    (553) 6,434.25 

Line  16 

Experimental     ( 140 ) 500.00 

Reserve    ( 555 )    500.00 

Line  17 

Over,  Short  and  Damage  ( 142 ) 250.00 

Reserve    ( 557 ) 250.00 

Line  18 

Variation  of  Weights  and  Measures  ( 143) 250.00 

Reserve    (550) 250.00 

Line  19 

Factory  of  Safety    (144) 500.00 

Reserve    (561) 500.00 

Line  20 

Maintenance    ( 150-152) 1,000.00 

Reserve    (563) 1,000.00 

Line  21 

Depreciation    (160-162) 2,407.00 

Reserve    ( 565 ) 2,407.00 

Line  22 

Loss  and  Gain    (600) 819.82 

Interest   (552) 819.32 

Sinking  Fund  Reserve   (567) 1,638.64 


Closing  the  General  Exhibit  113 

Line  23 

Bad  Debts    (706) 759.75 

Reserve    (569) 759.75 

Line  24 

Commissions    ( 700 ) 7,642.90 

Personal  Accounts  of  Salesmen 7,642.90 

Totals    $326,062.98     $326,062.98 


\  Closing  Opeeations 

With  all  the  foregoing  figures  in  the  General  Exhibit 
the  columns  when  footed  by  adding  machine,  or  other- 
wise, will  show  as  per  the  first  two  columns  of  the 
following  list.  "Where  a  daily  report  fonn  (Figure  14) 
is  employed,  the  totals  can  be  taken  off  on  a  slip  sheet, 
and  subsequently  the  net  balance  in  each  case  extended. 
Figure  14  shows  a  single  balance  column  for  use  with  a 
double  adding  device,  while  the  following  list  not  being 
an  adding  machine  reproduction,  shows  two  columns,  a 
debit  and  a  credit. 

When  the  net  balances  have  been  drawn  and  the 
equilibrium  proved,  the  next  step  is  to  ink  the  balances 
in  their  proper  columns. 

This  is  effectively  done  by  means  of  green  or  purple 
or  any  distinctive  colored  ink  other  than  red,  which 
indicates  a  meaning  previously  discussed.  There  is  no 
significance  to  the  green  colored  ink  feature  any  fur- 
ther than  as  a  ready  guide  to  the  eye,  yet  as  the  form 
is  a  large  one  and  such  guides  are  needed  to  minimize 
errors,  it  is  quite  important  for  that  o.ne  feature  alone. 

With  the  balances  in  and  the  totals  brought  down  to 
the  regular  footing  lines,  or  possibly  to  a  footing  line 
specially  drawn  somewhere  up  the  partially  filled  page 


114  Factory  Accounting 

or  folio,  the  process  is  complete  and  the  balances  can  be 
carried  forward  practically  as  discussed  in  Chapter  VT. 

Totals  Balances 

I>r.                   Cr.  Dr.                 Cr. 

Current  Cash $     51,397.41$      51,397.41 

Bank  No.  1 125,880.30        122,249.66  $        3,6.30.64 

Bank  No.  2 44,824.30          27,018.78  17,805.52 

City  Accts,  Rec...      138,537.77            9,313.52  129,224.25 

Country  Accts.Rec.      198,131.82          14,304.28  183,827.54 

Raw  Stores 226,876.80          28,561.90  198,314.90 

Stocks     171,149.72        109,119.20  62,030.52 

Material  in  Process      168,836.96          41,248.47  127,588.49 

Labor  in  Process..       153,748.79          45,987.83  107,760.96 

Overhead  in  Process        80,955.34          40,570.85  40,384.49 

Equipment    297,417.93               200.00  297,217.93 

Suspense    7,454.83               882.60  6,572.23 

Assets    626,366.19            5,862.50  620,503.69 

Liabilities    148,4Q0.44     1,723,093.38  1,574,692.94 

Accounts   Payable.         35,549.29        175,629.03  140,079.74 

Accrued  Labor....        47,705.94          58,960.44  11,254.50 

Reserves    9,800.31          78,634.29  68,833.98 

$2,533,034.14  $2,533,034.14  $1,794,861.16  $1,794,861.16 


CHAPTER  IX 
the  cash  account 

Relation  to  Genebal  Exhibit 

When  the  General  Exhibit  forms  part  of  the  account- 
ing system,  it  is  quite  essential  for  the  best  results  that 
the  records  of  cash  received  be  entirely  divorced  from 
the  records  of  cash  disbursed.  Such  a  separation  ren- 
ders much  more  difficult,  and  therefore  decreases  the 
possibilities  of,  fraudulent  manipulation  of  cash. 

The  ''imprest  fund"  (Figure  9,  Group  A)  is  intrusted 
to  a  petty  cashier  whose  duty  it  is  to  give  change  and  to 
make  all  disbursements  for  petty  expenses  and  in  settle- 
ment of  invoices  deemed  too  insignificant  to  be  passed 
through  the  purchase  records  singly.  The  amount  of 
this  fund  should  be  sufficient  to  provide  for  the  current 
calls  for  ready  cash  for  at  least  one  week  and  will, 
therefore,  be  determined  by  the  conditions  and  the  prac- 
tices of  the  particular  business. 

"Whatever  be  the  amount  of  the  ''imprest  fund,"  there 
should  be  no  further  charges  or  credits  to  the  account 
on  the  Ledger,  unless  it  is  decided  to  increase  or  dimin- 
ish the  amount.  As.  current  expenditures  are  made,  they 
are  evidenced  by  proper  voucher?^  and  these  vouchers 
are  periodically  taken  up  by  means  of  a  regularly  issued 
voucher  or  check  covering  their  amount,  the  items  being 
then  segregated  and  charged  to  the  accounts  to  which 
they  severally  belong. 

^       115 


116 


Factory  Aceounting 


\ — 1 

-— 

"" 

■^ 

— 

—^ 

— T. 



~~ 

r 

T_ 

•a 

b.  o 

R 

S 

XI 

C5 

0 

,i 

?l 

J 

-J 

i 

^ 

O  5 

«i 

0.   - 

o 

A  o 

tri  2 

o 

Q 

2  2 

■q 

U 

ti 

ft 

O  qC 

«) 

Ti 

r 

V 

w 
li 

i- 

< 

V 

0 

«1 

\ 

<   10 

1 

0 

■J 

1 

11 

I 

X 

n 

^ 

r 

UI 

J 

g 

5 

li 

U 

u 

_j 

1 

Jl 

ouii 

r 

11 

T 

' 

_ 

"" 

' 

~ 

1 

1 

u 

O 

1     2 

O 

1]  £ 

1 

g 

lO 

n    —1 

U    3 

f    V- 

i" 













1     Cl 

l""^ 

— 

— ^ 

— 



— 

— 

< 

1  1    u 

hii 



1 





— 

—  1     1 

d   cc 

,0 

— 

— 

— 



— 

— 1 

□ 

J 

c 
'0 

tzl 

UJ 

1 — 

1 

n 

O 

— 

— 

— 

■ 

11 

o 

a 

a 

._  . 

1 

i; 

1 1 

i 

O 

\ 

X 

1 

1 

t: 

H 

o 

•^ 

c 

« 

1  \ 

z 
u 

0 

3 

■| 

I 
c 

A 

i: 

Ti 

TI 

T5 

n 

tu 

c 

(U 

u 

UJ 

a 

(fl 

J 

F 

^ 

' 

^ 

15 

I 
c 
0 

o 

i2 

- 

f 

"t 

r 

r 



•0 

a 

"5 

is 

-J 

S? 

1 

The  Cash  Account 


117 


S 


^ 


118  Factory  Accounting 

Under  this  plan  the  ''imprest  fund"  is  kept  intact, 
and  if  audited  will  always  disclose  either  the  money  or 
its  formal  representations  in  cash  vouchers,  bank  checks, 
pay  tickets,  or  perhaps,  entries  of  proper  expenditures 
on  the  Imprest  Cash  Disbursement  Book. 

When  accommodation  checks  are  cashed  from  the 
fund,  such  checks  should  properly  be  drawn  or  endorsed 
either  to  cash  or  to  the  name  of  the  cashier,  and  not  in 
the  name  of  the  concern.  There  are  many  instances 
where  a  number  of  different  ''imprest  funds"  may  be 
maintained,  as  for  instance  different  petty  cashiers 
around  a  large  plant  or  at  branches  or,  as  more  fre- 
quently happens,  money  given  to  road  men  for  certain 
uses,  as  outlined  on  page  72  of  Chapter  VI.  The  modus 
operandi  is  the  same  for  many  accounts  as  for  one. 
Where  there  are  a  number  of  funds  which  remain  prac- 
tically stationary,  then  one  account  with  "imprest 
funds"  will  answer,  provided  the  ledger  account  is  kept 
specifically  clear.  In  the  case  of  traveling  foremen  it 
seems  better  to  maintain  a  separate  account  with  each 
individual,  charging  him  w^hen  such  a  fund  is  intrusted 
to  him  and  crediting  him  upon  its  return.  Upon  his 
departure  to  the  next  job  a  new  charge  is  made  for 
whatever  fund  he  is  intrusted  with;  in  this  way  the 
recurring  "imprest  fund"  transactions  of  each  man  are 
succinctly  set  forth  in  one  certain  ledger  account. 

Cash  receipts  in  the  form  of  currency  should  not  be 
intermingled  with  the  cash  of  any  "imprest  fund,"  but 
should  be  deposited  in  the  bank  with  other  receipts  for 
the  day.  There  is,  in  the  main,  no  objection  to  an  even 
exchange  in  money  values  b'etween  current  receipts 
and  the  "imprest  fund,"  as  for  instance  where  smaller 
bills    are    desired    in    the    "imprest    fund"    and    any 


The  Cash  Account  119 

exchange  is  made  with  the  cash  of  current  receipts,  or 
even  where  a  check  made  to  the  order  of  the  cashier,  an^ 
originally  cashed  from  the  *' imprest  fund,"  is  turned 
into  current  receipts  in  exchange  for  an  equal  amount 
of  cash.  There  are,  however,  notable  instances  where 
corporations  accepting  extended  payments  in  the  pur- 
chase of  their  product,  require  for  certain  legal  reasons 
that  the  various  selling  and  collecting  agencies  remit 
the  home  office  the  identical  pieces  of  money,  checks, 
stamps,  etc.,  that  were  tendered  in  payment.  Ordinarily 
when  small  remittances  from  debtors  are  received  in 
postage  stamps,  the  stamps  may  be  purchased  with 
money  from  the  *' imprest  fund"  and  the  transaction 
treated  as  a  payment  in  cash. 

When  the  cash  receipts  of  each  day  or  other  period 
of  time  are  covered  into  the  bank  intact,  the  footings 
of  the  Cash  Receipts  Sheet  can  be  kept  in  exact  articu- 
lation with  the  bank's  record  of  the  transactions,  thus 
minimizing  any  possible  danger  of  manipulated  figures. 
The  entry  on  the  General  Exhibit  when  a  deposit  is  made 
is  to  credit  Cash  and  debit  the  Bank,  the  debit  entry 
coming  under  the  proper  bank  if  there  is  more  than 
one  depository.  (See  Figure  12,  lines  2,  5, 15, 18,  27,  and 
30.) 

Theoretically  the  Cash  Receipts  Sheets  (Figure  16) 
and  the  Check  Register  Sheets  (Figure  17)  should  be 
footed  and  the  footings  transferred  each  day  to  the 
General  Exhibit.  In  practice,  however,  the  daily  trans- 
fer is  not  usual,  except  where  the  sheets  involved  are 
quite  numerous. 

Also,  as  a  matter  of  practice,  when  financial  reports 
are  made,  the  totals  of  those  records  which,  theoretically, 


120 


Factory  Accounting 


"1 

-^ 
^ 

-5 

s 

^ 

«? 

^ 

rs 

^ 

"? 

ti 

"5 

^ 

^n 

o 

Q 

§ 

o 

o 
o 

i2 

1 

^ 

^ 

"1 

s 

do 

«0 

^ 

0 

^ 

(~ 

~7 

-0 

VI 

4 

5 

■0- 

(? 

^>'i 

^- 

^ 

3 

"5 

^4 

'V 

Vio 

r^ 

VO 

(— 

<So 

^ 

-0 

-3 

:^ 

O    0 

■o"c 
^1 

nr 

M 

^ 

"> 
•^ 

^ 

^ 

5 

XJ 

"^ 

^ 
n 

tJ 

0 

'<1 

SI 

^^: 

") 

^ 

^ 

s. 

^ 

«^ 

v<$ 

vfl 

VJ 

Oo 

^ 

^ 

vj 

0- 

^ 

w 

^ 

t^ 

v9 

Co 

vS  -^1 

") 

^ 

^ 

VB 

t-~ 

Oo 

0- 

:^ 

<W 

:5 

^ 

•rs 

r; 

oo 

>- 

o 

oj 

3 

Co 

SS 

^ 

< 

1. 

.-© 

:= 

— 

J 

rr 

^ 

TTTT- 

7TTT- 

— 

•^ 

—  < 

( 

Q 

Eir 

-" 

^^ 

= 

~ 

rrr 

:!r 

r=^ 

rz 

^ 

E^ 

©^ 

= 

1 

5i 

nr 

•X 

L^^ 

\ 

>••.. 

Xc 

^ 

~~- 

-^ 

M 

■ ' 

f 

^ 

i>«= 

:::! 



..■( 

)■ 

J!r 

1:= 

0 

c 

f 

i 
CD 

f 

xi 

-fe 
o 

IS 

8 

a: 

u 

< 

o^ 

==. 

_ 

= 

■-e 

5r  ®-^ 





V 

)... 

"^ 

"^ 

h- 

r:: 

=< 

^ 

— 

? 

e> 

"^^ 

i3 

^liZ 

:^ 

t;;- 

> 

•■■G 

— 

r--<? 

i 

3<i, 

— 

— 

-J 

— r 



:'-■- 

) 



— 

._i 

5  oj 

-c: 



— 



■ — 

—  - 

— 

~c 

■" 

' — 

—  ^ 

fo 

— - 

3— 

— . 

■■•<! 

), 

^ 

4^ 

rJ 

~ 

— 

^■^ 

\ 

^ 

^ 

'(. 

b^ 

^ 

/ 

)0^ 

'e 

/ 

■^ 

■ 

oo 

/ 

\ 

r- 

\ 

s9 

^ 
>» 

"") 

t. 

4 

5X 

>— 

*-^ 

a 

il 

3«C 

q 

'■" 

"•~ 

=e 

rs| 



, 



r. 

y~" 

gr 

■*" 

^       ®- 

n 



' 

■•■( 

1 

•  — 

e 

c 
a       ^ 

o 
o 
o 

*0 

O 
O 

o 

lO 

O 
O 
-*■ 

o 
o 

o 

°o 

If) 

o 

O 
CD 

o 
o 

O 

o 

o 
o 

o 
o 
o 

o 
o 

ro 

o 
o 

(0 

o 
o 

to 

o 
o 

N 

o 
o 
o 
If) 

o 
o 

CO 

oi 

O 
O 

o 
o 

O 

o 

O 

o 
o 

o 
O 

1 

o 

10 

r- 

O 

-  o 

in 

N 
O 

o 

o 

o 

o 
o 

o 
O 

o 
lo 

vO 

o 
O 

• 

in 

vO 

o 
o 

o 

o 

vX) 
o 
q 

m 
m 

O 

q 

o 
m 

lO 

o 
o 

m 

r\i 
lO 

o 
q 

o 
o 
m 
o 
q 

« 

o 
m 
"^ 
O 
q 

o 
q 

O 
O 

q 

O 

q 

o 
m 
(0 
o 
q 

vn 

o 
q 

8 

rO 
O 

q 

o 
q 

o 

m 

N 

o 
q 

a 

o 
< 

0) 

<0 

vO 

o 

VO 

10 

CO 

'4- 

^ 

^ 

<0 
(<7 

O 
(0 

N 

C^ 

00 

in 

N 

0) 

U3 

: 

<0   \ 

.s 

'o 
PM 


P;4 


The  Cash  Account  121 

should  be  on  the  General  Exhibit  daily,  but  which  in 
practice  are  not  so  entered  until  the  end  of  the  week 
or  month,  can  be  assumed  to  be  entered,  and,  to  make 
this  effective,  the  pencil  footings  to  date  on  such 
auxiliary  record  (Figure  16,  below  line  14,  and  Figure 
17,  below  line  19)  can  be  added  to  the  figures  that  are 
actually  on  the  General  Exhibit.  In  cases  involving  a 
large  number  of  items  this  practice  is  not  feasible,  and 
the  General  Exhibit  must  then  each  business  day  absorb 
the  totals  of  all  auxiliary  records  that  can  be  run  on  a 
daily  basis. 

There  are  cases  where  bank  accounts  may  show  as 
overdrawn  while  yet  the  bank  records  show  a  substantial 
balance  to  the  depositor's  credit.  This  is  brought  about 
by  long  outstanding  checks,  as  for  instance  in  a  certain 
live-stock  industry  in  the  Middle  West,  where  hogs  and 
cattle  are  purchased  in  small  lots  from  numerous  ship- 
pers, many  of  whom  for  safe-keeping  hide  the  checks 
received  in  payment  until  the  money  is  needed.  There 
is,  perhaps,  no  just  reason  why  a  second  check  should 
be  issued  against  money  already  checked  out,  yet  it  is 
done  on  the  hypothesis  that  the  checks  are  equivalent  to 
demand  notes  which  the  bank  will  honor  upon  presenta- 
tion. There  is,  perhaps,  as  much  logic  in  the  depositor's 
making  legitimate  use  of  the  balance  without  cost  instead 
of  paying  6  per  cent  on  loans  as  there  is  in  the  bank's 
enjoying  the  benefits  of  it  without  paying  more  than 
2  per  cent  or  3  per  cent  on  the  average  dsiily  balance. 
This  state  of  affairs,  however,  is  tempting  to  cashiers 
who  are  susceptible  to  improper  impulses,  as  it  presents 
opportunity  to  ''borrow  money  from  the  company" 
without  authority  and  without  much  chance  of  detec- 
tion by  other  means  than  a  detailed  audit  embodying, 
of  course,  a  reconciliation  of  the  bank  balance. 


122  Factory  Accounting 

Cash  Receipts  Sheet 

Figure  16  represents  a  form  very  commonly  used  in 
connection  with  the  General  Exhibit  and  in  some  cases 
used  in  connection  with  an  old-style  Cash  Book  employed 
to  receive  totals  from  two  or  more  subsidiary  records. 
This  form  is  represented  as  a  sheet  punched  for  a 
modem  loose-leaf  device ;  at  the  top  is  printed  the  name 
of  the  form  and  space  for  writing  the  name  of  the  cur- 
rent month  in  which  it  is  used.  The  progressive  number 
indicates  the  sheet  or  page  number,  and  as  it  is  usual  to 
have  these  sheets  printed  on  the  two  sides,  the  reverse 
side  of  sheet  3  would  show  as  progressive  sheet  4.  The 
reference  shows  Exhibit  folio,  and  line  shows  where  the 
totals  of  the  page  are  transferred  to  and  absorbed  by 
the  Exhibit,  as  will  be  seen  on  Figure  12. 

This  form  is  much  more  crowded  in  appearance  than 
would  be  a  typical  sheet  in  actual  practice,  owing  to  the 
number  of  different  types  of  entries  shown.  Ordinarily 
the  great  bulk  of  entries  is  merely  receipts  of  cash  from 
customers. 

Figure  16,  like  all  other  of  the  subsidiary  records, 
is  in  equilibrium,  and  when  debit  and  credit  columns 
are  summarized,  they  appear  as  follows,  viz: 

Dr.  Cr. 

$38,684.21  $  1,483.94 

226.09  10,612.52 

1,219.81  28,033.65 


$40,130.11  $40,130.11 


The  eight  narrow  columns  at  the  left  indicate  the  form 
of  the  remittance  received  and  are  explained  as  follows : 
** Local   Ck.,"   indicating  a  local   check.     This   usually 


The  Cash  Account  123 

is  tlie  customer's,  or  payer's,  own  form  of  check  on  his 
local  bank. 

'^Cashr.  Ck.,"  indicating  cashier's  check  and  meaning 
a  bank  cashier's  draft  on  his  own  bank  or  one  of  its 
depositories,  presumably  New  York  exchange. 

'  *■  Draft, ' '  meaning  that  a  draft  drawn  on  the  customer 
has  been  deposited  for  credit  at  the  bank  and  collection 
by  them.  (It  is  only  by  an  understanding  and  arrange- 
ment at  the  bank  that  this  can  be  done.) 

"P.O.M.O.,"  indicating  post-office  money  order. 

**Exp.  M.O.,"  indicating  express  money  order. 

''Warrant,"  meaning  a  village,  city,  county,  state,  or 
other  corporate  form  of  order  for  money  having  a 
negotiable  value. 

' '  Postage, ' '  meaning  that  the  remitter  enclosed  stamps 
in  payment.  These  are  usually  purchased  through  the 
''imprest  fund"  and  the  amount  included  with  the  other 
items  and  deposited  in  due  form. 

' '  Currency, ' '  meaning  that  the  amount  received  was  in 
actual  cash  and  not  in  any  documentary  form. 

The  use  of  check  marks  in  these  columns  entails  no 
hardship  on  the  cashier,  and  it  does  make  a  full  and 
complete  record  of  the  transaction. 
.  In  some  businesses  it  is  a  considerable  help  in  trac- 
ing items  back,  and  in  other  instances  its  value  lies  in 
keeping  a  close  check  on  the  bank  account.  In  certain 
installment  houses  where  large  numbers  of  items  of  a 
given  amount  are  received,  the  deposits  are  made  up  by 
packages  of  money  orders  only  of  a  given  amount,  etc. ; 
hence  an  indication  of  the  form  of  remittance  is  quite 
essential. 

Under   the   heading,    "Amounts    Received,"    appear 


124 


Factory  Accounting 


Cx 

% 
e 

4- 

a 
<u 

Q 

H 

UJ 
CO 

y. 

CJ 

O 

£0 

If) 

^ 

fO 

Of 

r 

0 

<j) 

CO 

N 

O 

in 

^ 

CO 

C\J 

T 

§1 

3 

o 
y 

N 

: 

> 

- 

mmi 

-J 

The  Cash  Account  125 

three  columns,  headed  respectively,  ''Cash — Dr.,"  **Bank 
Number,"  and  ''Memoranda  of  Deposits."  In  the 
"Cash"  column  is  shown  the  exact  amount  received 
after  any  and  all  deductions  have  been  taken  off  by  the 
remitter. 

In  the  "Deposits"  column  is  shown  the  total  of  all 
items  received  since  the  last  deposit  was  made;  oppo- 
site this  total  amount  is  shown  the  number  of  the  bank 
in  which  the  money  was  deposited.  As  for  instance 
in  Figure  12,  line  15,  under  Bank  No.  2,  see  the  deposit 
shown  on  the  ninth  line  of  Figure  16.  In  like  manner 
see  line  18,  under  "Bank  No.  1,"  for  the  deposit  shown 
on  the  thirteenth  line  of  the  Cash  Receipts  Sheet.  Lines 
22  and  27  respectively,  show  the  deposits  on  the  twenty- 
first  and  the  thirtieth  lines  of  the  Cash  Receipts,  being 
respectively  the  No.  1  and  the  No.  2  bank  deposits. 

Where  the  banks  are  scattered  as  to  location,  as  for 
instance  a  New  York  bank  being  used,  it  quite  frequently 
happens  that  such  checks  as  are  free  of  collection 
charges  in  one  of  the  banks  are  sent  to  that  bank  instead 
of  to  the  other  bank,  where  collection  charges  will  be 
levied.  In  this  case  it  becomes  necessary  to  write  the 
designation  of  the  bank  opposite  each  check  included  in 
a  given  deposit  total.  As  this  is  necessary  for  only  one 
of  the  accounts,  the  usual  plan  is  to  pick  the  bank  hav- 
ing the  fewest  items  in  the  deposit.  The  items  of  the 
other  bank  deposit  are  designated  then  by  the  absence 
of  any  indicating  number. 

Types  of  Cash  Receipts  Entries 

The  column  headed  "Received  from"  is  primarily  to 
show  names,  although  it  is  in  fact  a  general  descriptive 


126  Factory  Accounting 

column  and  can  be  used  for  descriptive  matter  in  what- 
ever manner  desired.  The  sixth  line  in  Figure  16  is 
used  for  a  concise  statement  in  connection  with  the 
entry  on  the  fifth  line.  As  many  lines  as  desired  may 
be  used  for  a  single  entry,  and  in  the  case  of  extraor- 
dinary entries  enougii  space  should  be  used  to  make 
the  record  clear  and  explicit. 

The  column  headed  ** Descriptive"  is  for  showing  a 
tersely  expressed  identification  of  the  cash  item.  Where 
dates  alone  are  shown,  it  is  intended  to  indicate  dates  of 
invoices  which  are  being  covered  by  the  payment. 
Examples  of  this  are  showTi  on  the  third  line  (two 
items),  on  the  eighth  line  (six  items),  on  the  ninth,  tenth, 
and  eleventh  lines  (one  item  each),  and  on  several  lines 
thereafter.  Where,  as  on  the  first,  fourth,  and  other 
lines,  it  shows  *'stmt.2/l,"  it  indicates  that  the  entire 
statement  of  February  1  was  paid  for. 

The  item  on  the  fifth  line  involves  the  payment  for 
a  used  truck  sold.  As  this  truck  is  hypothetically 
entered  in  the  account.  Motor  Trucks  (414-415),  at  its 
original  cost  price,  it  must  be  credited  out  of  that 
account  at  the  same  figure  it  was  charged  in.  To  accom- 
plish this  the  difference  is  absorbed  into  Reserve  for 
Depreciation  of  Equipment  (564).  If  Motor  Trucks 
Account  were  to  be  credited  with  only  the  amount 
received  for  the  truck  sold  ($1,250.00),  there  would 
remain  in  the  asset  account  a  fictitious  value  of  $550.00 
agamst  nothing  whatever,  hence  the  need  of  the  entry 
as  shown. 

The  seventh  line  shows  payment  of  a  note  for  $562.50, 
together  with  interest  thereon,  $11.25.  Instead  of  taking 
two  lines  for  this,  an  encroaching  entry  is  made  on  the 


The  Cash  Account  127 

line  following,  the  two  items  being  tied  by  a  bracket, 
as  explained  in  Chapter  VI. 

On  the  ninth  line  is  payment  of  an  invoice  less  certain 
freight  charges  that  the  customer  has  deducted,  the 
freight  item  being  duly  charged  to  account  712. 

On  the  thirteenth  line  appears  an  item  purporting  to 
be  a  local  check  received  from  an  attorney  in  full  set- 
tlement of  the  hypothetical  "Boswell  Case."  It  appears 
the  settlement  was  for  $15,800.00,  but  from  this  the 
attorney  deducted  his  fee  of  $500.00.  The  full  amount 
is  credited  to  a  ** various  revenues"  account  called 
''Other  Sources"  (908-9),  and  the  attorney's  fee  is  duly 
charged  to  Law  Expense  (188)  in  the  administration 
cost  group  (F). 

On  the  seventeenth  line  is  shown  the  payment  of  a 
note,  a  transaction  quite  similar  to  that  on  the  seventh 
line. 

On  the  eighteenth  line  is  shown  an  entry  which  at 
times  is  quite  puzzling  to  know  how  to  allocate  prop- 
erly. It  represents  an  advance  payment  made  against 
certain  work  which  is  to  be  done,  or  certain  goods  fur- 
nished, where  the  work  has  not  yet  been  started.  In  this 
case  it  is  credited  to  Revenues  under  Other  Sources. 
It  cannot  consistently  be  credited  to  a  sales  account,  as 
it  is  not  yet  in  shape  to  invoice.  It  cannot  well  be  cred- 
ited to  Accounts  Eeceivable,  as  it  would  either  stand 
alone  as  a  credit  or  act  in  diminution  of  debits  against 
which  it  does  not  apply.  It  cannot  be  classed  as  an 
account  payable,  as  it  would  improperly  sweU  the  total 
liabilities. 

An  item  of  this  kind  does  not  disturb  a  well-financed 
business,  but  where  the  amount  is  much  lar^jer  and  the 


128 


Factory  Accounting 


■*j>     >> 


M       -5 
O 


t       u 


M      O 


3 
O 

w 


:^   3 


t/J 

A 

(f) 

Ti 

u 

fl 

cS 

(-) 

■^3 

fl 

43 

rt 

OJ       fe 


§ 

o 

bo 


O 


^ 


•2     tS 


t3 


C3 


O 


m 

(3 
O 


o 


d 


o 


Cl, 

pq 


•43 


OS 

OQ 

^ 

GO 

^ 

4) 
03 

PI 

'S 

O 

m 

OS 

i 

•1^ 

J 

1 

ft, 

to 

w_ 

^ 

d 

_^ 

a 



'^ 

— 

1 

CQ 

§ 

§ 

a  * 

1 

1 

1 

« 

Oi 

u 

a, 

O 

1 

ft 

'2 

[ 

PL, 

'3 

^ 

l-H 

<1 

« 

4*5 

\^ 

d 

M 

W) 

h 

a 

The  Cash  Account  129 

concern  is  borrowing  to  its  limit,  it  becomes  an  object  of 
possible  chicanery.  The  author  has  known  such  an  item 
to  be  credited  to  ''Goods  in  Process"  on  the  hypothesis 
that  the  advance  is  made  not  only  as  an  evidence  of  good 
faith,  but  as  a  help  in  carrying  the  extraordinary  burden 
which  the  contract  lays  on  the  factory.  As  a  proper 
solution  under  certain  conditions,  it  may  be  the  part  of 
wisdom  to  open  a  special  reserve  account  for  such  an 
item. 

When  a  business  is  normally  in  receipt  of  a  large 
volume  of  cash  with  order  business  (C.  W.  0.),  a  special 
''C.W.O."  column  is  usually  provided  and  the  accounts 
are  kept  in  a  special  ''prepaid  accounts  receivable" 
group,  the  total  of  which,  obviously,  is  on  the  credit  side 
and  is  self-explanatory  when  stated  in  a  balance  sheet. 

What  purports  to  be  the  receipt  of  a  dividend  check 
from  certain  stockholdings,  appears  on  the  ninteenth 
line  and  is  shown  as  credited  to  the  "Other  Sources" 
column.  The  same  applies  to  the  line  following,  where  a 
railroad  claim  is  paid. 

An  item  where  a  cash  payment  was  made  for  service 
of  a  motor  truck  without  a  bill  being  rendered  appears 
on  the  twenty-second  line. 

On  the  twenty-third  line  appears  an  entry  involving 
a  contra  account  where  a  buyer  is  also  a  seller.  These 
items  are  usually  annoying  and  involve  an  upsetting  of 
routine,  save  only  where  they  occur  so  frequently  that 
special  preparation  is  made  for  it  in  the  various  forms. 
In  that  case  there  would  be  a  special  column  for 
"Accounts  Payable"  in  the  Cash  Receipts  Sheet. 

The  refund  of  an  overcharge  in  an  insurance  premium 
is  sho^vn  on  the  twenty-sixth  line.     Credit  is  passed  to 


130 


Factory  Accounting 


the  "suspense  accouiit"  group  (K)  ''Insurance  Paid  in 
Advance"  (451). 

A  porter  was  overpaid,  and  the  amount  was  turned 
back  into  cash,  as  shown  on  the  twenty-seventh  line. 
This  appears  as  a  credit  to  ''Porters  and  Messengers" 
(223)  under  the  "manufacturing  expense"  group  (E) 
and  will  be  further  discussed  from  other  angles  in  suc- 
ceeding pages. 

The  last  entry  on  the  sheet  represents  a  small  balance 
paid  in  stamps  and  is  handled  the  same  as  any  other 
simple  entry,  the  stamps  being  purchased  for  cash  from 
the  "imprest  fund,"  as  previously  explained. 

Analytical  Columns 

The  "Other  Accounts"  columns  of  Figures  16  and 
17  make  it  possible  for  a  journal  entry  to  be  made  in 
either  of  the  forms.    While  a  number  of  examples  have 


c 

ommo 

Hitv 

fn 

r 

Pes, 

tyr 

Mar.hinp. 

Unit                9.\7P. 

vw= 

RECEIVED                  1 

ISSUED                        1 

ISSUED                          1 

BAL-<vNCELS                      1  1 

Dat«|  T>om 

^uijn 

!V«< 

v.lue    1 

Date 

Re^-n 

Quan 

^=^'lce 

Vatoie    1 

6»t= 

Re,-n 

(Vuai 

Ptkic 

v*tue 

Dats 

*""' 

fV,c, 

y^"-^  U 

' 

ORDERED                     III 

Da-lc 

OrdWn 

NccdaJ 

Orden 

v'      1 

1 

1 

.,_ 

L 

- 

,.- 

— . 

1 

Fig.  32.— Stock  Ledger  Card 


The  Cash  Account  131 

been  shown  in  order  to  acquaint  the  student  with  pos- 
sible contingencies,  yet,  in  actual  practice,  the  entries  in 
the  debit  column  of  the  Cash  Receipts  Sheet  and  in  the 
credit  column  of  the  Check  Register  Sheet  are  quite 
infrequent.  It  might  be  asked,  why  have  them?  The 
reason  is  that  the  presence  of  such  columns  presents  a 
solution  for  any  entry  condition  that  might  arise, 
whereas  the  absence  of  such  columns,  at  times,  may,  and 
actually  does,  make  awkward  conditions  possible. 

In  cases  where  any  one  or  more  classes  of  entry  are 
frequent  and  the  presence  of  one  or  more  additional 
columns  seems  advisable,  they  can  be  so  supplied  when 
a  new  form  i^  devised.  Where  more  than  one  class  of 
item  is  entered  in  the  ' '  Other  Accounts ' '  group,  involving 
more  than  one  column  in  the  General  Exhibit,  in  the 
transferring  of  totals,  it  becomes  necessary  to  analyze 
the  subsidiary  record  column  to  the  end  that  all  the 
items  involved  may  find  their  way  to  the  proper  con- 
trolling account  column  in  the  Exhibit.  This  can  be 
don  9  on  a  scratch  pad  if  there  are  a  considerable  num- 
ber, only  the  totals  sho^vn  in  the  column  being  analyzed 
after  the  manner  portrayed  in  all  four  of  the  ''Other 
Accounts"  columns  in  Figures  16  and  17.  The  designa- 
tions of  these  totals  may  be  by  written  captions  as  shown 
in  Figures  16  or  merely  by  the  letters  indicating  groups 
(in  accordance  with  chart.  Figure  9)  as  shown  in  Figure 
17. 

In  practice  these  analyses  are  usually  *' up-ended" 
in  the  columns  to  prevent  any  possible  confusion  with 
the  regular  figures  of  the  column  and,  moreover,  they  are 
written  small  and  in  a  distinctive  colored  ink. 

As  has  been  said,  a  certain  column  in  both  the 
Cash  Receipts  and  the  Check  Register  forms  are  but 


132 


Factory  Accounting 


infrequently  used;  hence  they  usually  present  available 
space  where  colored  ink  analyses  may  be  neatly  and 
concisely  shown.  In  order  that  the  entire  columnar 
analyzing  process  may  be  displayed  in  a  manner  sus- 
ceptible of  a  quick  checking-back  process  (in  case  of 
error  or  of  future  audit),  the  following  form  is  sug- 
gested, taken  from  Figure  16  which  is  very  much  fuller 
than  appears  in  actual  practice.  By  writing  small  and 
possibly  by  making  use  of  space  in  the  symbol  column 
this  form  can  be  employed,  copied  perhaps  from  a 
scratch-pad  draught. 


Dr. 
Mfg.  Exp 

$    500.00 

Mfg.  Exp. 
Mfg.  Exp., 

Suspense  . . 
Assets   . .  .  , 
Assets  . . . , 
Assets  . .  . , 

Reserves   . 
Revenue    . 

Cr. 

.  .$            .30 
3.75 

Accounts  payable 

Reserves  

Commercial   Costs 

. . . .       125.00 

550.00 

44.81 

$          4.05 

,  .$  1,800.00 

562.50 

.  .      3,500.00 

27.60 

$1,219.81 

5,862.50 

.    $        11.25 
105.00 

116.25 

..$15,800.00 

5,000.00 

1,200.00 

16.75 

6.50 

22,023.25 

$28,033.65 

Another  plan  is  to  make  the  original  analysis  in  or 
near  the  column  analyzed,  using  space  wherever  it  is 
available.  The  following  analysis  of  the  ''Check  Eeg- 
ister"  debit  column,  presenting  very  many  more  items 
that  would  obtain  under  normal  actual  circumstances, 
is  shown  here  for  example. 


The  Cash  Account  133 


E-F 
$    500.00 
615.00 

B60 

$50.00 

M51J, 
$38,063.10 

C 

$16.75 

36.22 

H 

$80.00 

M510 

$40,000.00 

15,000.00 

365.00 

K 

$100.00 
215.00 
500.00 
100.00 

900.00 
433.00 

$52.97 

/ 
$6,500.00 

$55,000.00 

50.00 

100.00 

6  00 

2^ 
$72.50 

250  00 

X 

$627.19 

$915.00 

$3,219.00 

Check  Register  Sheet 

Figure  17  is,  to  all  intents  and  purposes,  exactly  like 
Figure  16  in  its  operation,  save  that  each  is  the  exact 
antithesis  of  the  other;  where  one  records  the  receipt 
of  money  and  shows  its  transfer  to  the  bank,  the  other 
deals  only  with  itemized  withdrawals  from  the  bank. 

That  the  debit  items  equal  the  credit  items  is  proved 
by  the  following  test; 


Dr. 

Cr. 

$  13,244.59 

$112,619.83 

104,579.76 

4,600.16 

167.17 
437.19 

$117,824.35 

$117,824.35 


The  first  group  of  columns  has  to  do  with  the  checks 
constituting  the  principal  credit,  while  the  columns  on 
the  opposite  side  deal  with  the  disposition  of  the  debit. 
In  this  form  the  disposition  column  used  is  the  Accounts 
Payable,  the  "Other  Accounts"  debit  column  being  used 
but  infrequently,  as  previously  explained.  Whether  the 
'* discount"  credit  column  is  frequently  used  or  not  is 


134  Factory  Accounting 

entirely  a  matter  of  the  financial  condition  of  the  com- 
pany employing  the  method — whether  they  are  able  to 
discount  their  bills. 

The  uses  of  the  ''Payee"  and  ''For"  columns  are 
practically  the  same,  as  previously  explained  in  connec- 
tion with  the  Cash  Receipts  Sheet. 

Under  the  "Bank  Checks"  group  appear  a  memo- 
randa column,  a  narrow  check-mark  column,  a  (bank) 
check-number  column,  and  a  money  column  for  each 
separate  bank.  The  memoranda  column  is  for  two  pur- 
poses, namely:  (1)  to  make  pencil  or  ink  annotations 
of  the  available  bank  balances  as  shown  on  the  first 
line  where,  after  all  previous  checks  have  been  con- 
sidered. Bank  No.  1  has  $39,280.98  and  Bank  No.  2  has 
$9,844.19,  against  which  checks  can  be  drawn,  and  (2)  to 
show,  usually  in  a  distinctive  colored  ink,  any  checks 
that  are  outstanding  when  the  bank's  monthly  bal- 
ance is  reconciled.  In  the  latter  use,  in  the  absence  of 
colored  ink,  a  circle  with  a  horizontal  line  across  is  used 
to  represent  Bank  No.  1,  and  a  circle  with  a  vertical 
line  across  is  used  to  represent  Bank  No.  2.  Where  can- 
celed vouchers  (checks)  are  returned  by  the  bank,  a 
check  mark  is  placed  in  the  check  column;  in  coming  to 
a  check  number  that  has  not  yet  been  returned  by  the 
bank,  the  amount  thereof  is  carried  to  the  "memo" 
column  (as  per  seventh,  sixteenth,  and  twenty-eighth 
lines  for  Bank  No.  1,  and  fourth,  tenth,  and  thirty-first 
lines  in  the  case  of  Bank  No.  2).  Where  different  col- 
ored inks  are  used  each  successive  month,  it  is  possible 
to  discern  quickly  in  which  "balance"  a  certain  check 
was  returned  from  the  bank,  also  to  foot  easily  eacH 
bank's  checks  separately.  These  footings  are  usually 
carried  forward  from  one  sheet  or  page  to  the  next  and 
form  a  cumulative  total  which,  at  the  last  page  involved 


The  Cash  Account  135 

in  the  balancing  process,  gives  the  total  outstanding 
checks. 

In  Figure  17  but  one  check-number  column  is  used  for 
both  banks.  It  is  not  at  all  necessary  to  write  each  check 
number  in  full,  and  where  a  number  of  successive  checks 
are  issued  on  one  bank,  the  writing  of  the  full  number  is 
sufficient  every  tenth  number.  Where  a  check  number  is 
injected  for  the  other  bank,  that,  of  course,  breaks  the 
continuity  and  necessitates  the  full  number  again  imme- 
diately after  the  break. 

Some  users  prefer  separate  sheets  entirely  for  each 
separate  bank  and,  under  some  conditions,  particularly 
where  large  numbers  of  checks  are  issued,  that  is 
preferable. 

The  Check  Register  Sheets  and  the  Cash  Receipts 
Sheets  are  quite  usually  of  the  same  dimensions  and  kept 
in  the  same  binder  marked  ' '  Cash. ' ' 

Types  of  Check  Register  Entries 

The  first  entry  shows  a  check  issued  to  cover  the 
office  pay  roll,  and  in  similar  manner  under  date  of 
February  8  is  shown  a  check  to  cover  the  factory  pay 
roll.  Under  certain  conditions  it  is  a  help  to  treat  the 
pay  roll  as  an  invoice  for  labor  performed  and  to  enter 
it  in  the  Purchase  Analysis.  This  plan,  however,  is 
quite  likely  to  have  confusing  conditions  arise  and  is  not 
advocated  for  general  use.  The  present  entry  charges 
the  amount  directly  to  the  controlling  account,  ''Accrued 
Labor,"  to  which  credit  has  been  previously  passed,  as 
discussed  on  page  86  of  Chapter  VII  under  subsidiary 
records  and  on  page  288  (Figure  80). 

The  fifth  line  shows  the  reimbursement  to  the  cashier 
for  moneys  he  has  expended  from  the  ''imprest  fund;" 


136 


Factory  Accounting 


STOCK  DEP'T 
REQUISITION 


DATE, 


TO  PURCHASING  DEf*T  .  - 

PLEA3E  ORDtR  THE  FOLLOWING  NAMED  GOODS 


TOBEDtLfVERED 


.FOR  MACHINE . 


STOCK  CLERK 

QUANTITY 

SIZE 

7 

DESCRIPTIVE 

■^ 

1 


1 


FiQ.  33. — Purchase  Requisition 

the  vouclier  covering  these  items  having  been  duly- 
entered  on  line  4  of  the  Purchase  Analysis  (Figure  19). 

Typical  payments  of  "Purchase  Analysis"  items 
appear  on  various  lines  down  the  sheet,  namely,  second, 
sixth,  eleventh,  sixteenth,  and  from  twenty-fifth  to  thir- 
tieth inclusive. 

On  the  third  line  is  what  purports  to  be  an  advance 
of  cash,  made  to  a  country  customer  in  town,  the  item 
being  charged  to  the  customer's  account.     The  fourth 


The  Cash  Accownt  137 

line  is  a  * 'pick-up"  item  of  wire  purchased  without  using 
the  regular  purchasing  routine. 

Similar  to  this  is  the  payment  of  dues  to  an  organi- 
zation, though  ordinarily  such  a  charge  is  represented 
by  a  bill  put  through  the  Purchase  Analysis  in  the 
regular  way.  Others  items  analogous  to  this  condition 
are  found  on  lines  follomng,  namely,  ninth,  tenth,  thir- 
teenth, fourteenth,  eighteenth,  nineteenth,  twenty-fourth, 
thirty-first,  and  thirty-second.  It  usually  is  the  excep- 
tion rather  than  the  rule  where  ''Check  Register"  items 
are  directly  charged  elsewhere  than  to  "Accounts  Pay- 
able," and  in  this  example  the  "other  accounts"  group 
is  filled  up  to  an  extent  not  often  seen  in  actual  practice. 
It  presents  a  better  aspect,  from  all  angles,  if  the  broad 
rule  is  made  to  enter  all  items  payable  that  can  be  cov- 
ered in  a  bill  or  invoice  in  the  Purchase  Analysis  to  the 
credit  of  Accounts  Payable,  and  hence  such  items  as 
cover  the  pajTuent  thereof  will  appear  as  a  charge  in 
the  "Accounts  Payable"  debit  column  in  the  Check 
Register,  leaving  the  "Other  Accounts"  column  for 
extraordinary  entries  and  entries  other  than  those 
involving  a  commercial  invoice. 

The  eighth  line  presents  a  properly  typical  use  of  the 
"other  accounts"  group — an  advance  of  money  as  an 
expense  fund;  so  also  does  the  twenty-first  line  and 
again  the  twenty-third  line.  In  each  of  these  cases  the 
"other  accounts"  group  would  have  been  used  even  if 
entered  in  the  Purchase  Analysis. 

On  the  twelfth  line  is  an  entry  involving  a  "trade- 
in."  This  entry  will  involve  perhaps  an  Exhibit  entry 
to  finish  the  transaction  so  far  as  the  Office  Fixtures  and 
Machinery  Account  (401)  is  concerned.  Assuming  that 
$375.00  was  the  original  price  of  the  machine  traded  in, 


138 


Factory  Accounting 


THE  MANUFACTURING  COMPANY 


otssRiPTive 


THE  lv1ANUFACTURIN<S  COIvU^NY 


PURC^^^WG  AGCMT 


Fig.  34. — Purchase  Order 


The  Cash  Account  139 

the  credit  of  $200.00  leaves  $175.00  still  in  account  (400). 
This  balance  must  be  charged  to  Eeserve  fo-r  Depreci- 
ation (564).  It  would  have  been  done  in  the  present 
''Other  Accounts"  column  after  the  manner  shown  on 
Figure  16,  sixth  line. 

On  the  fifteenth  and  twentieth  lines  appear  checks 
for  "lifting"  notes  due  at  the  bank.  This  is  always 
the  most  satisfactory  way  of  handling  notes  payable 
rather  than  ''renewing"  them.  When  notes  are  paid,  the 
transaction  is  closed;  if  a  new  loan  is  negotiated  to 
enable  the  borrower  to  pay  the  former  loan,  that  is  a 
new  transaction  and  comes  on  to  the  records  in  a  clean- 
cut  way,  whereas  in  ordinary  renewal  proceedings  it 
often  happens  that  the  bookkeeper  knows  nothing  of  the 
renewal,  perhaps  handled  by  a  superior  officer,  until, 
being  out  of  balance,  somewhere  in  his  cash  records  he 
has  to  seek  the  cause.  In  any  case  renewals  require 
written  explanations  and  references  not  at  all  necessary 
where  notes  are  paid  by  Check  and  new  "discounts" 
credited  on  the  depositor's  account  by  the  bank. 

After  the  various  examples  shown  a  quite  unusually 
large  analysis  is  made  necessary  in  the  "other  accounts" 
group,  which  shows  as  follows  (based  on  Figure  9)  viz: 


Dr. 

Cr. 

60 

$            50.00 

H 

$200.00 

C 

52.97 

Z 

237.19 

E-F 

3,219.00 

H 

80.00 

$437.19 

I 

K 

6,500.00 
915.00 

M510 

55,000.00 

M514 

38,063.10 

N 
X 

72.50 
627.19 

$104,579.76 

140  Factory  Accounting 

These  figures  are  posted  to  Exhibit,  folio  2  (Figure 
12),  on  line  11.  As  the  entry  of  each  total  is  made,  such 
entry  is  evidenced  by  a  check  mark. 

In  making  check  marks  on  records  of  this  kind,  care 
should  be  exercised  that  uniformity  is  observed.  If 
check  marks  are  neatly  made  directly  under  one  another 
and  all  of  the  same  shading  and  slant,  they  are  pleasing 
to  the  eye;  on  the  other  hand,  when  they  are  sprawled, 
promiscuously  down  a  column,  they  not  only  smack  of 
inaccuracies  but  give  the  impression  of  sloppy  book- 
keeping. 


CHAPTER  X 

PURCHASES 

Antecedent  Records 

The  present  chapter  deals  with  the  controlling  records 
surrounding  purchases  and  does  not  essay  to  encroach 
upon  details  more  properly  belonging  elsewhere.  The 
need  of  certain  purchases,  the  routine  observed  in  acquire- 
ment, and  the  proper  disposition  thereof  upon  receipt 
are  reserved  for  Chapter  XV  for  ''material"  items  and 
for  Chapter  XVII  for  ''expense"  items. 

A  "safety-first"  feature  in  purchasing  is  to  guard 
against  overbuying  both  as  to  material  needs  and  as  to 
ability  to  meet  promptly  financial  maturities.  To  this 
end  a  form  of  "blotter"  is  used,  by  cautious  concerns, 
to  record  orders  given  to  supply  houses.  This  book  is 
not  usually  a  constituent  part  of  the  general  accounting 
plan,  but  is  in  memorandum  form  only;  it  presents  con- 
tingent liabilities  and  there,  excepting  in  very  few  cases, 
its  usefulness  ends. 

Figure  18  shows  a  typical  form  of  this  kind  as  applied 
to  a  furniture  factory;  other  lines  of  production  would 
depart  from  this  form  mainly  in  the  classifications  of 
commodities,  other  features  remaining  practically 
unchanged.  Where  such  a  record  as  this  is  obtained, 
it  is  a  foregone  conclusion  that  its  entries  are  well 
scrutinized  before  any  considerable  volume  of  money 
value  in  the  way  of  accounts  payable  is  entailed. 

141 


142  Factory  Accounting 

The  Voucher  System 

A  system  of  recording  expenditure's  which  for  a  few 
years  made  great  headway  in  modern  business,  but 
latterly  waned  for  factory  uses,  is  that  known  as  the 
''voucher  system."  With  railroad  companies  the  use 
of  vouchers  and  vouchered  pay  rolls  in  making  disburs-e- 
ments  has  becqme  universal  and  is  outlined  here  as  a 
tj^jical  use  of  the  general  plan.  Vouchers  are  drawn 
up  to  represent  all  supply  bills,  all  balances  due  to 
foreign  roads,  etc.;  vouchered  pay  rolls  are  the  basis 
for  the  payment  of  all  salaries   and  wages. 

One  of  the  administrative  departments  af  a  railroad 
company  is  that  of  the  purchasing  agent.  All  purchases 
for  their  shops  and  various  departments  are  made  on 
order  (Figure  34)  from  this  department.  The  goods 
purchased  are  delivered  at  some  designated  point  along 
the  lines  of  the  company,  but  all  invoices  for  these  goods 
are  sent  directly  to  the  purchasing  a^ent. 

With  one  operation  of  the  typewriter  (very  similar  in 
physical  handling  to  that  of  a  purchase  order,  Figure  34) 
there  is  made  out  (1)  a  voucher,  (2)  a  certified  copy  of 
the  bill,  (3)  a  duplicate,  and  (4)  a  triplicate. 

The  voucher  and  the  certified  copy  are  retained  tem- 
porarily by  the  purchasing  agent;  the  duplicate  and 
the  triplicate  are  sent  to  the  general  superintendent  of 
the  grand  division  for  which  the  goods  were  purchased. 
He  forwards  the  duplicate  to  the  consignee  of  the  goods, 
and  the  latter  compares  it  with  the  actual  goods  received, 
0.  K.'s  it,  and  returns  it  to  the  general  superintendent, 
who  forwards  it  to  the  purchasing  agent.  The  general 
superintendent  retains  the  triplicate  in  his  own  files. 

The  purchasing  agent  then  sends  the  certified  copy 


Purchases  143 

with  the  voucher  to  the  auditor  of  disbursements,  who 
checks  additions,  extensions,  and  by  whom  approved. 
If  correct,  he  appends  his  own  signature.  It  is  then 
entered  in  a  Voucher  Register  (very  similar  in  effect 
to  Figure  19)  with  classifications  fitted  to  a  railroad's 
records,  such  as  maintenance  of  way,  maintenance  of 
equipment,  transportation  costs,  etc. 

The  voucher  is  then  sent  to  the  comptroller  to  be 
approved  for  payment,  whence  it  is  returned  to  the 
auditor  of  disbursements,  who  forwards  it  to  the  office 
where  the  bill  originated,  to  be  delivered  to  the  consignor 
of  the  goods.  The  comptroller  lists  such  vouchers  on 
an  adding  machine  and  credits  the  Vouchers  Audited 
Account  in  the  General  Ledger  for  their  total  each  day. 
The  reverse  side  of  the  voucher  constitutes  a  check  or 
order  drawn  by  the  treasurer  in  favor  of  the  consignor 
for  the  amount  of  the  bill.  The  payee  endorses  this 
check  and  deposits  it  in  his  o^ti  bank,  whence  it  comes 
eventually  to  the  company's  bank.  When  the  check 
has  been  returned  in  the  usual  way  to  the  office  of  the 
treasurer,  it  is  turned  over  to  the  office  of  the  auditor 
of  disbursements.  This  office  enters  the  date  of  receipt 
in  the  Voucher  Register,  and  the  voucher  itself  with  the 
payee's  endorsement  constitutes  the  payee's  receipt  for 
the  money. 

This  is  the  course  of  procedure  for  an  ordinary  pur- 
chase. In  the  case  of  materials  and  supplies,  where 
a  number  of  purchases  are  made  from  the  same  supply 
house  in  a  month,  the  procedure  is  varied  to  a  certain 
extent.  Instead  of  vouchering  and  approving  each  bill 
separately,  one  voucher  may  be  drawn  to  cover  aU  the 
bills  from  the  same  house  for  one  month. 

At  the  end  of  the  month  the  voucher  account  in  the 


144 


Factory  Accounting 


General  Ledger  (kept  by  the  comptroller)  is  verified 
by  abstracting,  on  an  adding  machine,  the  amounts  of 
all  vouchers  in  the  Voucher  Eegister  which  are  not  indi- 
cated as  *'paid." 

This  plan  it  can  readily  be  seen,  while  having  merit 
for  large  and  ponderous  organizations,  is  not  well  fitted 
to  factory  propositions  whose  organizations  are  more 
''closely  knit."     Still   there   are   many   large   factory 


^  Day 

j,   Or^erNs. 

1 

0*000  0 

Aect! 
•  0  0 

Synhol 
0  0  0 

1 
o 

0 

• 

3 

0 

1 

• 

3 

ChediNo. 

io  0  0  0 
1    i   1    II 
2222  2 
333  3* 

CheckAnouot 

•  oo9o:o  0 

1  •!    1    ill    1 
222  2  2;22 
33  3  3*;3  3 

Purchase  Amount 
Or. 

•  000  0»0 

1  •  1  1  1 : 1  1 
222  2^:2  2 

3  3  3^3:33 

OitcounT 
Cr. 

•  0  Ojoo 

1    r   ill   t 
2^2|2  2 
3  3  313  3 

V»riou»    I 
«     ^^-       1 

00  0:0  Og 
II  lii  1 

3  3  3:3  3  » 

1  1 

1  1  1  1  1  • 

•  2«22  2 

3  3  3333 

1  1  1 

2  2  2 

33  3 

•  1    1 

2  2^ 

3  33 

•  • 
XI  5 
IS  6 

5  5  5  5  5  S 

6  a  «69  6 

s  s  s 

66  6 

4+4 
S  SS 

e*6 

4 
5 
& 

•4- 

s 

6 

4-4-^4-4 
SSS  S  5 

4-4-*4-+i*4- 

SSS  &sib# 

fe6  fcfe&'.fe  6 

44^4-4-|44' 
S  6  SSS;&5 

6&6  &e>;6  6 

4-4-4-;4^ 
£>S5!s& 

4.44-144^ 

B  7 

219 

7  7  7«77 

8  8  8  8  8  8 
3  a  e  «  9  9 

7»7 
888 
9  8  9 

7  7  7 

8  8  S 

9  93 

7 
g 
9 

7 
8 

3 

7  7777 

8«8  8  8 
9  9  S^S 

777  77177 

8  8  8  8  818  8 

9  9  9  S  9:9  9 

777  77;77 

8  8  8  &  8;  8  8 

3  9   9   9  S\D% 

777177 

8  8  •i  8  8 

9  e  sts  9 

88  818  8| 

Fig.  35. — Punched  Card  for  Purchases  . 

organizations  which  employ  it  largely  because  of  the 
numerous  approvals  required  for  each  expenditure  made. 
This  does  not  mean  that  each  and  every  invoice  received 
is  vouchered  before  it  is  investigated,  as  that  is  not  so ; 
each  invoice  quite  usually  is  passed  on  individually 
before  it  comes  to  the  hands  of  the  voucher  clerk  at  all. 
Its  accuracy  as  to  receipt  of  goods,  prices,  extensions, 
footings,  etc.,  is  usually  investigated  in  a  fitting  man- 
ner; hence  the  voucher  for  the  most  part  acts  as  a 
place  of  registration  of  approval  signatures  of  ranking 
officials,  a  jacket  for  enclosing  the  invoices  in  a  compact 
final  file,  an  explicit  receipt  of  the  payee,  and  a  collective 
means  of  arriving  at  charges  against  operating  accounts. 


Purchases  145 

Under  the  voucher  system  no  Purchase  Ledger  is 
maintained  wherein  are  entered  to  the  seller's  credit 
all  invoices  passed  for  payment  and  all  checks  given  or 
charges  levied  against  hini.  Instead  there  is  maintained 
an  index  showing  the  name  of  each  creditor  and  the 
voucher  number,  or  numbers,  issued  in  his  favor.  Where 
this  index  is  lacking,  there  usually  is  confusion  at  times. 

Under  the  voucher  system  no  record  is  had  of  the 
current  liabilities  of  the  company  until  invoices  are 
vouchered  and  entered,  unless  perchance  a  positive 
record  is  maintained  after  the  manner  discussed  in 
relation  to  Figure  19,  the  record  of  goods  ordered. 
Where  concerns  are  slow  pay,  it  often  happens  that 
their  purchase  invoices  go  sixty  days  or  more  before 
vouchering,  in  which  case  the  voucher  system  is 
inadequate.  In  other  cases  the  invoices  are  properly 
vouchered  and  credited  to  a  Vouchers  Audited  Account 
but  held  for  payment  for  some  future  time  when  they 
are,  perhaps,  transferred  to  a  Vouchers  Payable  control 
account. 

There  are  accountants  who  still  cling  tenaciously  to 
the  voucher  system  as  a  panacea  for  all  accounting  evils, 
just  as  there  are  still  to  be  found  those  who  have  not 
yet  come  to  the  voucher  system  stage,  still  clinging  to 
the  fallacy  that  without  a  Creditors  Ledger  one  would 
be  all  at  sea  as  to  the  true  status  of  any  given  creditor's 
account.  The  wonderful  strides  made  in  the  improve- 
ment and  development  of  ''mechanical  brains"  now 
make  possible  many  things  that  until  a  very  few  years 
ago  were  seemingly  impossible.  With  the  equipment 
of  a  voucher  index  and  a  listing  adding  machine  as 
much,  or  even  more,  information  can  be  compiled  in  a 
reasonably  short  space  of  time  concerning  commodity 
purchases  from  any  certain  creditor  over  any  desired 

10 


146 


Factory  Accounting 


space  of  time  under  a  voucher  system  than  would  be 
possible  to  record  under  a  Creditors  Ledger  plan 
embodying  merely  dates  and  invoipe  totals. 

Properly  indexed  and  when  under  "control,"  as  in  a 
General  Exhibit  or  its  equivalent,  the  Voucher  Record 
is  a  useful  book.  It  discloses  the  amount  of  vouchers 
payable  which  were  received  from  all  sources  during 


Day 


00 
I  I 


90000 


•  0  0 


symbol   Oept     QnaiYtity 


0  00  90 


•  ••0« 


lilt 


KUTerial 


6O00I 


••oo 


00 


Exp«rvse     H 


•  •00:00p« 


17 


4    I  I   I    I 

2  2222 

3  333* 


1  \    I 

2  2  2 

3  3  3 


•  I    t 

2  22 

3  32 


1  I    I    I    I 

2  2  2  2  2 

3  3  3  3  3 


2  2  £«•• 


4-  4-4-4-4- 

5  SllS  5 

6  6666 


4-4-9 
6  5  £ 
6  6  6 


5  55 

6  66 


4-« 
S£ 
66 


4-4.  4-4-4- 
55  5*5 
6  6  6  6  6 


7©7  77 
a  8  8  »  8 
9  3  3  S  8 


77  7 
SOS 
9  9  9 


7  7  7 
a  88 
9  9  9 


77777 

8  8  8  8a 

9  S  d  3  9 


3  333 

4  4  4-4; 
5S  S  5 
£6  06 
7  777 
3  8  66 
9  9  9  9 


1  I    I   I 

2  2  2»: 

3  303 


III* 

2  2  2  2 

3  3  3  3 


1  II  I 

2  202 

3  333 


4  4-4  4 

5  5  S5 

6  6  6  6 


4  44  4 

5  5  5  5 

6  6  66 


4  4-44 

5  5  SS 

6  6  66 


7  7  7  7 

8  8  88 

9  9  9  9 


7  7  7  7 
a  608; 
9  9  9  9 


7  7  70' 

88  eel 

9  3  99 


I    IP 

4  4^ 

-1 

5  5g 

6  6 

8  ef 

0) 

3  Sov 


Fio.  36. — Punched  Card  for  Finished  Orders 

the  month  and  previously,  and  provides  for  the  distribu- 
tion of  the  amounts,  whether  to  the  classes  of  materials 
purchased,  or  to  the  individual  accounts  set  up  to 
analyze  the  expenses  of  the  period.  But  there  is  a 
limit  to  its  usefulness,  and  to  claim  more  for  it  than 
it  can  do  is  to  mislead  the  student  of  accounting. 

The  Puechase  Analysis 


Figure  19  shows  a  form  which  is  perhaps  an  out- 
growth of  the  Voucher  Register  idea,  embodying  most 
of  the  strong  points  and  but  few  of  the  weak  ones. 
.It  differs  from  the  analytical  Purchase  Journal  only 
in  that  it  provides  for  the  recording  of  data  concerning 


Purchases  147 

payment  to  the  creditors  for  the  invoices  recorded.  The 
only  essential  difference  between  the  nse  contemplated 
for  this  fonn  and  that  of,  perhaps,  practically  the  same 
form,  spoken  of  as  a  ''Voucher  Register,"  is  that  in 
the  present  case  each  separate  invoice  is  individually 
considered  and  treated  as  a  unit  of  payment,  whereas 
in  a  Voucher  Register  the  voucher  is  the  unit  of  payment. 

The  actual  method  of  payment  used  in  connection 
Y.ith  the  Purchase  Analysis  is  not  of  particular  conse- 
quence so  far  as  the  value  of  the  form  as  such  is 
concerned. 

Pajmient  may  be  made  by  simple  form  of  bank  check, 
or  by  a  voucher  check,  which  is  a  combination  of  voucher 
form  and  bank  check;  or  there  may  be  a  modification 
of  the  latter  in  the  way  of  a  check  form  bearing  upon 
one  end  of  the  obverse,  or  on  the  reverse  thereof  k  printed 
or  rubber-stamped  form  with  ink  entries,  showing  just 
what  invoice  the  check  covers,  also  any  deductions  in 
the  way  of  discounts,  freights,  etc.,  that  may  have  been 
taken  off.  Under  fitting  conditions  a  Check  Voucher 
can  be  employed,  equipped  with  a  narrow  edge  for 
binding  (in  a  modern  type  of  loose-leaf  binder  which 
can  bind  within  a  half-inch  space) ;  these  can  be  main- 
tained in  alphabetical  form  during  the  current  month 
and  posted  in  ledger  style  with  such  invoices  as  are 
passed  for  pa^nnent  and  entered  in  the  Purchase  Analy- 
sis. As  a  voucher  is  ready  for  payment,  it  is  abstracted 
from  the  ''Accounts  Payable"  binder,  imprinted  with 
the  name  of  the  bank,  given  the  next  consecutive  check 
or  voucher  number,  entered  on  the  Check  Register 
(Figure  17),  and  in  due  course  sent  to  the  payee.  Upon 
its  return  from  the  bank,  together  with  other  paid 
vouchers,  it  is  filed  chronologically  under  the  creditor's 
name,  thus  presenting  the  equivalent  of  a  continuous 


148  Factory  Accounting 

ledger  account  by  settlements  with  each  creditor  and 
eliminating  the  need  of  an  index. 

In  the  absence  of  such  a  plan  it  is  quite  usual  to 
preserve  in  a  place  apart  those  invoices  which  have 
been  entered  in  the  Purchase  Analysis.  This  **  unpaid 
bills"  file  is  then  to  be  treated  with  due  respect  and  no 
invoice  abstracted  therefrom  without  a  ''dummy"  being 
left  in  its  place,  or  perhaps  a  memo  being  left  for  all 
invoices  of  a  given  date  or  page  of  the  Purchase  Analy- 
sis. An  instance  of  use  of  this  latter  plan  is  the  case 
of  the  Stores  Ledger  clerk  taking  a  number  of  invoices 
for  entry  on  the  Stores  Ledger  records  (Figure  32). 
Where  invoices  are  so  cared  for,  they  present  the  equiva- 
lent of  a  ''going"  ledger  account  and  can  always  be  used 
in  connection  with  balancing  or  reconciling  the  ' '  accounts 
payable"   group  in  the   General  Exhibit    (Figure   15). 

This  record  can  be  in  the  form  of  loose  leaves  in  a 
binder  or  in  a  bound  book  with  the  entire  form  on  a 
single  page  or  spread  across  a  folio,  as  may  be  desired. 
Furthermore,  the  long-and-short  leaf  idea  described 
in  Chapter  VI  may  be  employed  if  the  designer  of  the 
record  so  elects. 

The  grouping  of  the  columns  in  Figure  19  is  in 
accordance  with  the  chart  shown  in  Figure  9  and  is  so 
arranged  that  the  totals  of  each  group  may  be  carried 
to  the  General  Exhibit  (Figure  12).  In  considering  the 
construction  of  the  form  it  will  be  noticed  that  the 
heading  shows  the  month  and  that  at  the  right-hand 
comer  is  shown  the  page  number  and  the  folio  and  the 
line  number  of  the  General  Exhibit  to  which  the  totals 
are  transferred. 

The  "Check  Mark"  column  immediately  preceding 
the  "Invoice"  column  is  for  indicating  that  the  invoice 


Purchases  149 

has  been  paid.  In  practice  this  can  be  done  quickly 
and  is  effective  without  having  to  wait  for  the,  probably 
later,  operation  of  showing  the  record  of  payment. 

The  *' Invoice"  column  shows  the  date  and  the  amount 
of  the  invoice.  The  total  of  the  amount  column  becomes 
the  credit  to  the  ''Accounts  Payable"  column  in  the 
General  Exhibit. 

Next  to  the  ''Invoice"  column  are  four  check  mark 
columns  for  indicating  what  0.  K.'s  have  been  affixed 
to  the  invoice  at  the  time  of  its  entry.  This  is  not  an 
essential  but  is  a  convenience  in  putting  work  through 
before  all  necessary  preliminary  details  have  been  per- 
formed. The  record  then  shows  what,  if  anything,  is 
lacking  that  it  may  later  be  supplied. 

In  the  "deductions"  group  is  a  column  for  Freight 
and  one  for  any  other  items.  In  effect  these  are  but 
memoranda  columns  ai],d  have  no  part  in  the  equilib- 
rium of  the  page.  In  the  case  of  the  "Freight"  column 
the  total  is  ringed  to  show  that  it  is  not  to  be  so  con- 
sidered; it  may,  however,  be  used  as  the  basis  of  an 
entry  in  the  General  Exhibit,  charging  Accounts  Pay- 
able and  crediting  Manufacturing  Expense  Account 
(241),  provided  the  deductions  come  clean-cut  and  with 
no  semblance  of  complexities.  The  "Account"  column 
is  used  to  show  the  freight  bill  number  or  any  other 
symbol  or  very  terse  descriptive  matter. 

It  may  seem  quite  impossible,  but  it  is  nevertheless 
true,  that  where  freight  bills  are  not  sharply  checked 
against  the  invoices  or  shipments  to  which  they  are 
related,  there  is  frequently  double  payment  of  the  same 
item. 

Under  the  head  of  "Payment"  are  two  columns: 
one  for  the  check  or  voucher  number  and  the  other  for 


150 


Factory  Accounting 


the  date  thereof.  These  are  usually  filled  in  when  oppor- 
tunity presents  and,  when  a  subordinate  clerk  is  avail- 
able, the  duty  is  usually  intrusted  to  such,  provided 
he  be  fairly  accurate.  It  is  at  this  point  where  the 
Check  Register  (Figure  17)  ''Accounts  Payable"  debit 
column  becomes  in  effect  a  part  of  the  Purchase  Analysis 


kw?  c^  i/,  '/C> 


^2o_ 


SYMBOU 


^a. 


OBDEW  WO.      (pLL^^ 


BEPT.  h».      S^ 


bU».NTITT  tZO0 


_/jtl^f£_ 


^ 


J/t^ 


AMOUNT    ^    W<^s!^ 


CR.ACCT.  No. 


cf/ 


/6y 


2  2 


A3 


9  3 


Acct. 


0  0# 

1  I  I 
29Z 
©3  3 
4-4-4- 

5  S  5 

6  6  6 

7  7  7 

8  6  8 

9  9  9 


Symbol 


100 


•  0  0 .0  0 


t    I   I 

3  33 


4-04- 

5  S5 

6  6  6 


7  7  7 

868 
9  5  9 


I    I    I    I    I 

3  3  303 


5  SS  SS 
6^6  66 


7  7  7  77 

8  S  8  S  8 

9  9  9  3  9 


Orpt    Quantity 


Mil 

2  2«2 

3  3  3  3 
4-4-4  4- 

5  5  5  S 

6  6  6  6 

7  77  7 

8  8  8  8 

9  9  9  9 


Unit 


00:00 


•  2;22 
3  3'3  3 


4- 4 '4  4 
5S';S  S 
6  6;6  6 


77177 
8«6  8 
9  3:9% 


Acct. 
•  00 


I    lO*  I    I 


2  2  2 

3  3  3 

4  4-4. 

5  S  5 

6  6  6 

7  7  7 
8«S 
9  9  9 


Symbol 
000 


2  2  2 

3  3  3 

s  s  s 

«•  € 

7  7  7 

8  8  8 

9  9% 


9  (j> 


Fig.  37. — Punched  Card  for  Material  Issuances 


to  the  extent  of  showing  the  payment  of  the  individual 
invoices,  or  vouchers,  as  the  case  may  be.  One  author 
goes  so  far  as  to  provide  under  a  heading  "Settlements" 
column  headings  for  all  that  the  present  volume  shows 
in  Fig-ure  19  and  in  addition  a  separate  column  for 
settlement  by  notes  payable  and  a  separate  column  for 
returned  purchases  of  each  of  the  various  classifications 
shown  in  the  purchase  section.  This  might  be  well  if 
three-quarters  or  one-half  of  the  purchases  had  returns 
and  other  deductions  to  consider  or  were  most  largely 
paid  by  note,  but  under  normal  conditions  it  is  open  to 
grave  doubt  if  so  many  columns  usurping  the  functions 
of  the  Check  Register  do  not  confuse  conditions  rather 
than  clarify  them.  1 


Purchases  151 

An  adding  machine  list  of  all  unpaid  or  **open" 
items  on  the  Purchase  Analysis  should  articulate  with 
the  controlling  account  of  the  Accounts  Payable  in  the 
General  Exhibit  and  also  should  agree  exactly  with  the 
invoice  of  the  '^ Unpaid  Invoices"  file. 

The  remaining  columns  to  the  right  constitute  the 
distribution  media;  first  come  the  various  groups  of 
stores  accounts,  then  the  various  groups  of  accruing 
expenses,  and  finally  the  ''other  accounts"  group,  the 
operation  of  which  has  been  discussed  in  preceding 
chapters. 

Types  of  Entries 

On  line  1  is  an  invoice  for  insurance,  the  cost  of  which 
is  passed  to  the  "suspense"  group  to  be  held  pending 
its  accrual,  a  portion  being  absorbed  into  ''expense" 
each  month,  as  further  discussed  in  Chapter  XVIII.  A 
similar  item  appears  on  line  10,  the  nature  being  that 
of  perhaps  billboard  advertising  paid  for  in  advance, 
and  again  on  line  18,  theater  program  advertising  paid 
for  in  advance.  It  would  have  been  permissible  to  show 
these  items  under  "Accruing  Expense"  and  later  to 
transfer  them  to  where  the  present  plan  charges  them, 
as  is  set  forth  in  further  detail  on  page  329.  This 
different  handling  is  done  at  times  where  some  question 
arises  as  to  just  where  the  item  properly  belongs,  and 
it  is  not  convenient  or  desirable  for  the  moment  to 
look  it  up. 

On  line  4  appears  the  entry  of  the  cashier's  imprest 
voucher,  the  distribution  thereof  being  entirely  in  the 
"Accruing  Manufacturing  Expense"  column  in  an 
encroaching  entry  tied  by  a  bracket,  the  point  of  which 
is  in  line  4. 


152 


Factory  Accounting 


>- 
o 

< 


o 

^  f 


ARTICLE 

TO  BE  USED  ON 

PIECES 

WEIGHT 

BIN 

COST  REICORD 

= 

NO. 

SYMBOL 

PRICE 

PER 

EXTENSION 

FiQ.  38.— Material  Card   (Front  and  Back) 


Purchases  153 

Line  5  presents  the  entry  of  an  item  for  patent  attor- 
ney services,  the  charge  being  capitalized  under 
''patents"  (440).  Line  7  presents  an  invoice  against 
which  a  credit  memo  is  shown  in  the  "deduction" 
column  in  memorandum  form;  the  positive  entry  of 
this  credit  memo  is  on  line  28,  passing  credit  to  the 
same  account  which  the  invoice  of  February  4  shows 
a  charge  against.  As  the  credit  bears  the  date  of 
February  3,  it  is  to  be  presumed  that  it  applies  on  a 
previous  invoice  not  shown  in  the  present  form,  but 
is  being  ''used"  at  the  first  opportunity. 

Large  concerns  entitled  to  a  credit  with  the  railroad 
companies  do  not  pay  individual  freight  bills,  but  make 
settlements  at  stated  intervals.  Where  this  is  done,  a 
duly  drawn  settlement  sheet  is  usually  prepared  and  is 
quite  as  usually  given  •  a  progressive  number.  This 
settlement  sheet  is  practically  an  abstract  of  the  bills 
it  is  desired  to  pay.  In  some  cases  the  charges  of  the 
settlement  are  arrived  at,  and  those  items  of  "in" 
freight  which  are  to  be  charged  to  shippers  are  segre- 
gated from  those  items  which  are  to  be  absorbed  by 
the  consignee. 

The  former  are  then  charged  to  a  Freight  in  Suspense 
Account,  and  the  latter  to  Manufacturing  Expense;  in 
like  manner  the  "out"  freight  is  segregated  between 
what  the  company  stands  and  what  is  charged  to  the 
customer.  A  freight  settlement  is  entered  on  line  16, 
but  in  this  instance  the  charge  is  divided  only  between 
"in"  freight  and  "out"  freight,  or  perhaps  still  finer, 
as  some  "out"  freight  might  be  chargeable  to  Manu- 
facturing Expense,  as  in  the  instance  of  raw  material 
returned  to  seller  or  possibly  shipped  to  some  outside 
job  which  the  company  is  working  on. 


154  Factory  Accounting 

Where  the  charge  is  divided  only  between  manufac- 
turing and  commercial  costs,  as  shown  in  the  present 
example,  the  items  of  freight  chargeable  against  supply- 
houses  are  duly  entered  against  such  (as  shown  on  lines 
3,  11,  20,  and  26  of  Figure  19)  and  the  total  of  the 
column  ($233.68)  becomes  a  credit  to  Manufacturing 
Expense  and  a  charge  to  Accounts  Payable.  In  this 
way  there  is  always  a  chance  of  failure  to  show  the 
item  in  the  column  and  to  deduct  it  from  the  shipper, 
whereas  under  the  plan  of  a  Freight  in  Suspense 
Account  the  item  would  remain  in  the  account  and  show 
as  a  charge  until  it  was  praperly  ''absorbed." 

On  line  17  appears  an  item,  the  settlement  of  which 
was  made  by  a  contra  account  as  described  in  pre- 
ceding paragraphs  concerning  the  twenty-third  line  in 
Figure  16. 

The  entry  of  a  pay  roll  is  shown  on  line  19;  this,  as 
is  elsewhere  discussed,  is  not  an  ideal  plan,  particularly 
when  daily  or  periodical  summaries  of  labor  are  made 
after  the  manner  of  Figure  80.  Where  the  pay  roll 
is  to  be  entered  on  the  Purchase  Analysis,  it  is  not  usual 
to  discriminate  between  Accounts  Payable  (512)  and 
Accrued  Labor  (514),  as  the  present  plan  contemplates. 
It  will  be  noticed  that  both  the  debit  and  the  credit 
columns  of  ''Other  Accounts"  are  here  brought  into  use 
and  that  the  "Invoice"  (Accounts  Payable)  column  is 
not  used  at  all.  The  entry  is  shown  on  Figure  19  merely 
to  bring  out  the  point. 

On  line  21  appears  an  entry  a  little  out  of  the  ordi- 
nary in  charging  certain  hypothetical  name  plates  for 
a  special  machine  to  an  order  in  process  (Order  No. 
2745).    Except  in  extraordinary  cases  all  purchases  of 


Purchases  155 

material  should  be  at  least  theoretically  passed  through 
the  storeroom  and  issued  only  on  requisition  or  bill  of 
material  in  regular  form. 

Charges  against  reserves  set  up  for  the  purpose  of 
maintenance  (562)  are  shown  on  lines  22  and  27;  beyond 
this  the  entries  show  merely  ordinary  routine  items  of 
''material,"  ** supplies,"  and  "expense. 


>> 


Summary  of   Entries 

Line 

Xo.  Debit           Credit 

1.  Insurance  paid  in  advance (450)  $     215.75 

2.  Brass  Castings   (74)  92.40 

3.  Coke    (70)  1,625.00 

4.  Direct  Expense  Charge,  Dept,  3 (103)  3.80 

Factory  Supplies (137)  1.65 

Miscellaneous  Mfg.  Expense ( 145)  9.27 

Postage (182)  50.00 

Printing  and   Stationery ( 184 )  3.40 

Traveling  Expense (186)  75.00 

Subscription  and  Donations ( 187)  9.50 

5.  Patents (440)  75.00 

Accounts  Payable  (5  lines) $  2,160.77 

6.  Files    (76)  82.40 

7.  Sheet  Iron   (74)  7,648.15 

8.  Buildings   (432)  9,800.00 

9.  Lumber (72)  2,425.00 

10.  Advertising  paid  in  advance (454)  275.00 

Accounts  Payable  (5  lines) 20,230.55 

11.  Pig  Iron (70)  1,832.50 

12.  Lumber (72)  2,642.75 

13.  Sand  Paper   (76)  76.80 

14.  Commercial  Agency (702)  50.00 

15.  Shipping  Boxes (710)  92.50 

Accounts  Payable  ( 5  lines) 4  J34.55 

16.  Freight  Inbound (141)  109.25 

Freight   Outbound (712)  219.20 

17.  Elapsed  Time  Calculator (400)  125.00 

18.  Program    Advertising (454)  35.00 

Accounts  Payable  (4  lines) 488.45 


156 


Factory  Accounting 


5 

8 

U3 


cc 


< 


I    « 
1 


^    i 


ARTICLE 

TO  BE  USED  ON 

QUANTITY 

COST  RECORD 

NO. 

SYMBOL 

DREW 

RETT) 

USED 

PRICE    PER 

EXTENSION 

1 

1 

1 

1 

LZ 

^, 

FlQ.  39.— Excess  Material  Card  (Front  and  Back) 


Purchases  157 

19.  Goods  in  Process (312,  etc. )  34,921.18 

Manufacturing  Expense (100)  2,926.92 

Commercial   Costa (700)  215.00 

Accrued  Labor (515)  38,063.10 

20.  Milling    Machine (404)  825.00 

21.  Special  Name  Plates (340)  7.50 

22.  New  Roof  on  a  Building (562)  135.00 

23.  Water  Bill (130)  26.90 

24.  Waste  (136)  3.50 

25.  Shipping  Cartons (710)  68.50 

Accounts  Payable  (6  lines) 1,066.40 

26.  Steel  Rods (74)  9,428.19 

27.  Repairs  to  an  Engine 135.00 

28.  Sheet  Iron  returned Cr.  135.18 

Accounts    Payable Dr.  135.18 

29.  Pig  Iron 7,642.19 

30.  Angle  Iron 4,641.75 

Accounts  Payable  (4  lines) 21,837.13 


,405.77     $88,405.77 


The  Accounts  Payable  credit  eveiy  fifth  line,  more 
or  less,  is  to  put  entry  in  the  form  of  an  ordinary  journal 
entry  and  has  no  further  significance.  If  it  were  not 
likely  to  be  the  cause  of  haziness,  but  one  credit  would 
have  been  sho^vn  for  the  twenty-four  lines  embodied 
in  the  five  totals.  A  proof  of  the  '^ Purchase  Analysis'* 
column  totals  after  all  the  foregoing  entries  are  in 
shows  as  follows,  viz: 

Debit  Credit 

$11,099.69  $50,342.67 

5,067.75  38,063.10 

21,675.31  

159.20  $88,405.77 

3,2.19.19  === 

645.20 
260.00 
525.75 
45,753.68 

$88,405.77 


CHAPTER  XI 
specific  order  production 

Characteristic  Features  of  Specific  Order  Plan 

The  specific  order  plan  of  cost  finding  is  at  once 
the  most  simple  and  the  most  complex  of  the  various 
methods  of  finding  costs.  Its  simplicity  lies  in  its  direct- 
ness, for  the  material  and  labor  consumed  and  the 
expense  incurred  in  the  production  on  a  specific  order 
number  are,  so  far  as  possible,  applied  directly  to 
that  order  number.  Its  complexity  is  due  to  the  fact 
that  every  order  number  must  be  treated  separately, 
and  this  involves  a  multiplicity  of  detail,  a  close  watch, 
and  an  accurate  record  beyond  that  required  by  any 
process  methods  of  cost  finding. 

The  specific  order  plan  of  cost  finding  is  an  ideal 
system  where  it  can  be  economically  employed.  It  is 
the  most  accurate  of  all  systems,  for  every  cost  incurred 
on  a  particular  job  is  charged  to  that  job.  This  largely 
avoids  the  averaging,  the  estimating,  and  the  reserva- 
tions  for  variations,  characteristic  of  every  other  ade- 
quate system. 

The  application  of  the  specific  order  plan  of  cost 
finding  requires  certain  conditions,  not  only  of  product, 
but  of  administration.  The  product  must  be  one  in 
which  each  order  number  can  be  kept  separate  and  dis- 

158 


Specific  Order  Production  159 

tinct  from  all  other  order  nunibers.  Beyond  this,  as 
each  order  number  is  treated  separately,  it  requires 
a  large  amount  of  detail  work,  a  sharp  distinction 
between  order  numbers,  an  equally  sharp  division  of 
costs,  and  an  accurate  record.  Because  this  sharp, 
detailed  precision  of  operation  will  not  be  enforced,  the 
system  cannot  be  used  in  many  cases  where  it  might 
otherwise  be  advantageously  employed.  The  specific 
plan  of  cost  finding  is,  as  stated,  the  most  accurate  of 
all  systems  when  properly  carried  out,  but  is  less 
accurate  than  most  others  when  it  is  not  properly 
carried  out. 

When  the  specific  order  system  is  used,  the  detailed 
charges  to  each  department  order  number  must,  at 
the  end  of  the  month  or  cost  period,  tally  with  the  total 
departmental  charge  for  that  month  or  cost  period,  a 
condition  which,  while  invaluable  for  checking  purposes, 
requires  an  absolute  precision  and  unvarying  attention 
to  details  which  cannot  always  be  secured. 

Under  the  specific  order  system  the  material  used  in 
each  order  number  is  charged  to  that  order  number  at 
cost. 

Supplies  used  for  a  certain  order  number  are  similarly 
charged  at  cost.  In  this  the  specific  order  plan  does 
not  differ  in  any  way  from  other  systems  of  cost  finding. 

As  in  the  case  of  material,  labor  required  for  the 
production  of  a  certain  order  number  is  charged  to 
that  order  number  at  pay-roll  cost.  Thus,  if  a  certain 
order  number  requires  the  attention  of  a  skilled  mechanic 
receiving  $4.50  for  an  eight-hour  day  and  the  services 
of  an  assistant  at  $2.00  per  day,  each  for  four  hours, 
the  job  is  charged  $2.25  for  the  skilled  labor  and  $1.00 


160 


Factory  Accounting 


> 

1 

• 

^5 

§  s  1  i  r 

9 

2 

1 
o 

3 

£ 

1 

o 

S 

a 

a 

8 

o 
o 

a 

»- 
o 

IS 

r> 

2 

c/» 

or 

3 

1  1  1 1 1  i 

§    3    3  1  <    8 
S  1   1   1  ^    « 

t     £     «    -5    "5     t> 

1 

u 
a 

u 

u 

S 

2 

> 
■J 
y 

E 
n 
o 

t- 

8 

u 

3 

a 
u 

t- 
r 

UI 

1 

c 
o 
TS 
V 

o 

3 

i 

Q 
ki. 

> 

ID 

i 

y 

i 

kl 

h 
z 
w 

x: 

« 

<5  1 11  :5  1  1  1    ««    ^ 



SIZE 

SYMBa 

.  PIECES 

Dept 

BIN 

COST  RECORD 

PRICE 

PER 

EXTENSION 

1 

1 

FlQ.  40. — Semifinished  Cktods  Card  (Front  and  Back) 


Specific  Order  Production  ;  161 

for  the  services  of  the  assistant.     In  other  words,  the 
job  is  charged  at  cost  for  what  it  gets. 

For  its  proper  operation  the  specific  order  system 
requires  continuous  employment,  as  otherwise  idle  time 
must  be  provided  for.  Where  idle  time  is  unavoidable, 
it  is  distributed  as  part  of  the  expense  overhead  within 
the  individual  department. 

Under  the  specific  order  plan  of  cost  finding,  expense 
is  charged  to  each  separate  order  number  in  equitable 
proportion.  The  proportion  may  be  determined  by  any 
of  the  methods  for  expense  diffusion  discussed  in 
Chapter  XVII,  though  for  general  purposes  the  man- 
hour  method  will  be  found  the  most  accurate  and  satis- 
factory; or  where  machines  are  largely  used,  the 
machine-hour  plan  of  expense  distribution  may  be 
employed  so  far  as  machine  work  is  concerned. 

In  the  application  of  the  specific  order  plan  of  cost 
finding,  other  plans  may  be  utilized  in  part  or  even  in 
whole.  Thus  in  one  department  the  machine-hour  will 
perhaps  be  employed;  in  another  department  the  sold- 
hour  plan ;  and  in  another  department  the  list  percentage 
or  standard  cost  plan.  Such  diversity  of  plans  in  one 
establishment  is  but  seldom  found,  but  the  use  of  two 
plans  of  more  or  less  distinctive  characteristics  in  a 
single  establishment  is  frequent.  On  the  other  hand, 
a  single  plan  might  be  employed,  as  for  instance,  the 
machine-hour  plan;  for,  broadly  defined,  the  specific 
order  plan  is  merely  a  method  of  finding  accurate  costs 
for  specific  order  numbers,  and  these  costs  may  be 
ascertained  by  any  plan  of  cost  finding  that  will  meet 
this  requirement. 

It  will  be  noted  that  the  specific  order  plan  and  what 
is  called  the  "estimate  and  test"  plan  of  cost  finding 

n 


162 


Factory  Accounting 


® 


Shop  Order  No. 


Quantity  ordered. 
ArtjcA  e  _______ 


Date  wanted . 
Date  finished  _ 


Dept  No Operation  No. . 

St <yid a rd  T< me  h. 

Must  leave  this  DepT 


Dep't  No,. Operation  No. . 

STandard    Time h_ 


Must  leave  this  Dep't. 

Dep't  No. OperationNo.. 

Standard    Time h_ 

Must  lee^ve  This  Dep'f 


OepT  No. OperationNo. 

Standard   Time h. 

Must  leave  this  Dep't 


Standard    Time, 

fAuet  leave  this  Dep't. 


.h.. 


Mattri&I  fopShopOnterNo.. 
t>ate  wanted 


.m. 


Dep't  No. Operation  No, 


.m. 


Datft,cfteeived_. 

Fig.  41.— Order  Tag  with  Material 
Requisition  Coupon 


are  almost  diametrically 
opposed.  Under  the  "es- 
timate and  test"  plan  the 
first  estimates  are  usu- 
ally but  little  more  than 
gTiesses,  not  provable  by 
balance  and  only  subject 
to  correction  by  later  tests. 
Under  the  specific  plan,  on 
the  other  hand,  nothing  is 
done  by  guesswork,  but 
each  and  every  item  enter- 
ing into  product  is  care- 
fully weighed  or  meas- 
ured, and  at  all  times,  and 
at  all  points,  if  properly 
operated,  its  results  are 
subject  to  proof  by  bal- 
ance. 

Peoduction  Order  Forms 

The  importance  of  the 
particular  shape  or  form 
of  the  production  order 
depends  entirely  upon 
what  functions  are  de- 
pendent upon  it.  In  prac- 
tice it  ranges  from  a  mere 
informal  notice  to  begin 
operations  upon  a  certain 
job  up  to  a  complete  con- 
trolling and  cost  analyzing 
arrangement  for  a  specific 
order.    Its  primary  pur- 


Specific  Order  Production  163 

pose  is  to  substitute  written  for  verbal  instructions,  so  as 
to  avoid  mistakes.  Besides  tliis^  it  may  be  so  designed 
as  to  describe  the  order,  state  the  material,  patterns, 
and  dies  needed,  show  its  consecutive  place  in  a  numer- 
ical system  of  identification,  plan  the  work  as  to  time  and 
department,  trace  the  work  at  any  stage,  report  the 
actual  production  and  classify  it  as  "good"  or 
**  defective, "  collect  cost  details  as  they  are  incurred, 
and  also  show  their  distribution.  It  is  not  recommended, 
however,  that  the  form  be  used  for  all  these  purposes. 

A  typical  form  for  use  in  connection  with  the  specific 
order  plan  is  sho^vn  in  Figure  41  and  further  discussed 
in  Chapter  XVI.  If  instructions  as  to  minute  details 
are  necessary,  these  can  be  handled  by  means  of  sub- 
orders bearing  the  controlling  order  number,  or  numbers. 
If  the  work  is  well  systemized  in  the  factory,  the  sub- 
orders may  be  issued  to  the  various  departments  con- 
cerned simultaneously  with  the  issue  of  the  controlling 
order;  this  then,  besides  giving  necessary  instructions, 
apprises  them  of  the  date  the  order  is  presumed  to 
reach  them,  before  the  controlling  order  comes  into  their 
possession,  thus  preparing  them  for  its  reception  and 
fulfillment. 

If  the  production  order  is  used  to  record  the  cost 
in  addition  to  regulating  the  production,  the  form  should 
be  designed  to  show  the  material  used,  the  labor  time 
and  cost,  arid  the  proper  proportion  of  expense  overhead. 
Pro\dsion  may  also  be  made  for  the  classifying  of  such 
special  indirect  expenses  as  can  be  charged  directly  to 
the  order.  The  design  should  be  such  that  the  cost 
clerk  may  arrange  the  data  and  ascertain  the  total  cost 
of  the  order  airectiy  on  the  form.  The  order  then 
becomes  the  cost  sheet  also  and  serves  the  purposes 
both  of  collection  and  compilation. 


164  Factory  Accounting 

Cost  Sheets 

The  work  done  by  the  cost  clerks  under  the  cost  sheet 
plan,  no  matter  what  the  particular  ruling  may  be, 
is  usually  of  the  simplest  kind,  and  its  difficulty  is  a 
matter  of  quantity  only.  Though  the  various  steps 
of  the  process  may  seem  to  form  a  complicated  whole, 
the  process  as  a  whole  is  simple  and  consists  of  five 
steps:  the  posting  of  values  to  cost  sheets  from  tickets 
or  cards  for  (1)  material,  (2)  labor,  (3)  sundries, 
(4)  totalizing  the  cost  sheets  when  the  work  is  com- 
pleted, and  (5)  summarizing  the  totals  of  individual 
order  numbers  to  ascertain  that  ''the  sum  of  the  parts 
equals  the  whole"  amount  charged  in  the  Goods  in 
Process   (controlling)  Account. 

While  the  author  has  no  argument  against  the  present 
plan,  it  is  not  suited  for  work  of  a  homogeneous  nature, 
or  where  details  of  costs  of  every  separate  order  are 
not  required.  As  the  factory  product  is  built  up  from 
separate  items  of  ''material,"  "labor,"  and  "sundries," 
the  items  multiply  to  such  an  extent  that  it  becomes 
almost  prohibitive  to  post  it  all  in  detail,  and  careful 
planning  of  cost  finding  arrangements  along  other  lines 
can  effect  a  large  saving  in  clerical  labor,  can  still  not 
only  retain  the  "proof  by  balance"  plan,  but  improve 
the  means  of  ascertainment,  and  need  resort  to  detail 
posting  only  when  a  complete  subdivision  of  cost  is 
desired.  Such  a  plan  is  discussed  in  the  section  irome- 
diately  following. 

The  Production  Registeb 

Under  certain  local  conditions  and  with  product  of  a 
certain  character  it  may  be  found  advantageous  to  use 


Specific  Order  Production  165 

what  is  called  a  '^ Production  Register"  instead  of  a 
series  of  job  cost  sheets.  Figure  20  represents  a  fomi 
of  Production  Order  Register  which,  if  properly  used, 
articulates  with  the  subsidiary  records  discussed  in  the 
present  volume.  As  many  lines  as  necessary  may  be 
allowed  for  each  succeeding  shop  order  as  it  is  entered, 
the  number  required  in  each  case  depending  on  the  char- 
acter of  the  work,  the  complexity  of  the  numbers 
involved,  and  also  whether  the  labor  reports  are  collated 
and  added  before  entry  or  whether  such  entries  are 
made  in  detail  on  the  Production  Register.  If  a  certain 
job  is  held  up  for  any  reason,  there  are,  of  course,  no 
time  tickets  on  the  job  and  no  entries  in  the  Production 
Register  until  work  is  resumed. 

By  using  various  colored  inks  for  entries  (one  color 
for  each  month  or  cost  period)  there  is  no  difficulty  in 
separately  footing  the  figures  of  the  various  months 
or  cost  periods,  even  though  certain  jobs,  as  is  quite 
usually  the  case,  run  over  from  one  cost  period  to 
another,  or,  as  not  infrequently  happens,  run  into  a 
third  or  fourth.  On  Figure  20  appear  certain  characters 
in  lieu  of  colors  which  are  intended  to  illustrate  the  use 
of  the  color  scheme.  A  circle  crossed  by  a  line  is 
used  in  each  case,  the  position  of  the  lines  being  indica- 
tions as  follows,  viz:  downward  and  to  the  left  for 
the  first  month  and  representing,  let  us  say,  purple; 
horizontal  for  the  second  month  and  representing  green; 
downward  and  to  the  right  for  the  third  month  and 
representing  blue. 

It  will  be  noticed  that  the  page  of  the  Production 
Register  provides  for  four  separate  footings,  its  footing 
lines  being  intended  respectively  for  the  first,  second, 
third,  and  fourth  months  or  cost  periods.  When  all  the 
time  report  totals  have  been  entered  for  the  monthly 


166 


Factory  Accounting 


cost  period,  the  totals  can  be  taken  for  the  various 
sheets  of  the  Production  Register  and  from  them  a 
grand  total  or  summary.  This  grand  total  must,  of 
course,  exactly  equal  the  amount  of  the  costs  that  have 
been  entered,  and  as  a  precautionary  measure  should 
be  checked  from  the  other  records,  which  show  the  total 
of  material  issued,  the  total  pay  roll,  overhead  expendi- 
tures, etc.  The  next  month  the  operation  is  the  same, 
the  picking-out  of  intermingled  figTires  for  the  different 
totals  being  aided  by  the  different  colored  inks.  In  this 
way  a  controlling  record  is  maintained.  Orders  that, 
by  any  chance,  are  still  in  process  unfinished  at  the  end 
of  four  months  can  be  carried  forward  to  a  new  sheet. 


THE  MACHIME        KN|FE      COMPANY 
Before  Starting  Work,  Read  Carefully 

ORWRNo..                                                                                          Date.       

Kind  and  Number 

Length                                   Width                     Thickness                        Temper           /^^V 

V 

^ 

Bevel 

Depth  and  Width  Slot 



ORDER  No.                            Kind,  Number,  and  Size 

MATERIAL 

*^;SIXt 

UJEO 

SCRAP 

MATERIAL 

AMOUNT 

u&eb 

SCRAP 

f       "" 

WOOD 

B 

THIN  IRON 

CAST  STEEb^ 

C 

SOFT  STEEL 

D 

BAR  STEZL 

BAR 

SHEET  STtEL 

/PINNER 

mOM  ^REFINED 

UAIO  STOCK  < 

PAP£R 

(common 

CHAIR  LE<5 

MISCELLANEOUS 

BmuT  UP 

BARS 

Fig.  42. — Order  Tag  with  Material  Report  Coupon 


Specific  Order  Production  167 

Ordinarily  a  separate  series  of  sheets  is  maintained 
for  each  separate  department  of  the  factory;  when  this 
is  done,  the  sheets  of  each  department  will  show  only 
such  production  order  numbers  as  are  to  be  worked  on 
at  all  in  that  particular  department.  Or  again  the  sheets 
can  be  arranged  in  such  manner  that  only  one  month's 
records  appear  on  any  one  sheet,  the  ''total  to  date" 
amount  being  carried  forward  to  the  succeeding  month. 
In  this  connection,  under  certain  conditions  it  may  be 
a  convenience  to  use  the  colored  ink  scheme  as  applied 
to  different  producing  departments  instead  of  to  months. 
Figure  20  is  so  arranged  that  either  of  these  conditions 
may  be  assumed  in  studying  the  form. 

The  Production  Register  is  in  effect  an  exhibit  of 
every  producing  department,  showing  for  each  the  total 
amount  of  material  used  and  the  total  productive  labor 
costs.  In  the  case  of  each  of  these  costs  a  comparison 
can  be  made  with  the  controlling  columns  in  the  General 
Exhibit,  thus  establishing  the  accuracy  of  the  totals 
of  all  forms  directly  involved. 

It  is  sometimes  advantageous  to  arrange  the  ruling 
of  the  Production  Register  so  as  to  allow  from  three 
to  six  lines  for  each  month  for  each  production  order, 
on  which  its  cost  items  may  be  properly  posted.  It  is 
usually  better,  however,  particularly  where  time  records 
are  used,  to  collate  all  the  charges  for  labor  and  for 
material  upon  a  sheet  specially  ruled  for  the  adding 
machine  and  to  enter  them  by  totals  on  the  Production 
Register.  There  will  be  no  entries  on  the  Production 
Register  until  the  end  of  the  current  month  or  cost 
period,  save  when,  in  the  interim,  costs  are  desired  on 
the  conclusion  of  some  particular  order. 

Even  when   ''interim"   costs   are  desired,  it  is   not 


168  Factory  Accounting 

essential  that  the  cost  figures  be  entered  on  the  Pro- 
duction Register  before  the  end  of  the  month  or  cost 
period,  as  the  results  may  be  obtained  equally  well  by 
the  use  of  a  memoranda  sheet.  The  Production  Register 
is  not  designed  for  quick  reference  to  the  costs  of  par- 
ticular order  numbers,  but  is  intended  primarily  for 
the  collating  or  the  assembling  of  the  different  cost 
figures  into  a  complete  whole,  thereby  securing  a  total 
of  all  orders  in  a  particular  department  for  statistical 
and  comparative  purposes  and  for  entry  on  the  general 
books. 

The  debit  charges  to  the  Production  Register  usually 
are  entered  at  the  close  of  the  month  or  cost  period. 
At  this  time  the  cost  cards  or  coupons  which  have 
accumulated  under  the  various  order  numbers  during 
the  period  are  removed  from  the  card  tray  files  of  each 
department.  One  order  number  at  a  time  is  taken  up, 
and  the  respective  cards  for  castings,  finished  parts, 
material,  and  labor,  belonging  to  that  order  number  are, 
for  each  department,  separated  into  individual  piles. 
Then  each  class  is  in  turn  totaled  on  the  adding  machine, 
and  the  totals  are  accumulated  in  the  lower  ** counter" 
of  the  double  adding  device  to  arrive  at  a  total  for 
each  order  number  for  use  in  the  controlling  record. 

For  this  purpose  a  large  sheet  of  paper  properly  pre- 
pared is  inserted  in  the  adding  machine,  and  the  order 
number  is  typed  at  the  head  of  the  first  column.  The 
operator  then  takes  the  cards  coming  from  the  depart- 
ment in  which  the  particular  order  was  put  in  work. 
The  castings  or  the  finished  parts  cards  or  coupons  are 
first  selected,  and  the  total  money  value,  which  each 
card  or  coupon  represents,  is  listed  upon  the  sheet. 
When  all  such  cards  have  been  listed,  the  column  is 


Specific  Order  Production 


169 


totaled,  the  footings  showing  the  money  value  of  the 
castings  or  finished  parts  used,  as  the  case  may  be. 

The  operative  then  proceeds  in  like  manner  to  list  the 
other  cards.  In  the  case  of  machine  time  or  labor  cards 
the  operative  will,  if  a  ''split"  adding  machine  is  used, 
list  the  workman's  clock  number,  the  hours  and  min- 
utes (or  tenths)  involved,  and  the  money  value  of  the 
time,  the  totals  then  showing  the  full  time  consumed  on 


A    RRir.K       nnRPORATiniM                      Kiln.c;    .^T 

1  QUANTITY 

ARTICLES 

USED  FOR 

THESE   COLUMNS  FOR  MAIN  OFFICE 

ACCOUMT      PRICE 

COST     1  / 

• 

/ 

—4^ 

1 

1 

Fig.  43. — Report  Form  for  Material  Used 

the  particular  order  number  and  the  money  value  of 
this  time.  (See  under  Pay  Summaries,  page  292,  for 
differences  and  disposition  of  odd  cents.) 

After  the  listing  of  the  data  from  the  first  department, 
the  cards  of  the  same  order  number  in  each  succeeding 
department  are  treated  in  like  manner,  so  that  on  the 
conclusion  of  the  operation  the  adding  machine  sheets 
will  show  all  the  prime  departmental  costs  of  a  given 


170  Factory  Accounting 

shop  order,  gToiiped  in  one  place  and  susceptible  of  a 
grand  total  if  desired. 

"When  all  the  cards  of  the  various  shop  order  numbers 
have  been  listed,  the  totals  for  all  the  departments  of 
each  classification  are  entered  in  the  proper  columns 
of  the  Production  Eegister  on  the  lines  devoted  to  the 
particular  order  number. 

Diffused  expense  against  each  individual  order  in  each 
department,  as  explained  in  Chapters  X\T;I  and  XVIII, 
is  entered  in  the  proper  column  of  the  Production 
Register.  The  total  of  the  diffused  expense  column  of 
each  department  must  articulate  with  the  expense  charge 
against  that  department  within  the  limitations  set  forth, 
beginning  with  page  311. 

All  the  debit  columns  of  the  Production  Register  must 
agree  with  the  equivalent  debits  in  the  synthetical 
accounts  of  the  General  Exhibit. 

Credits  of  the  Production  Register 

The  credits  of  the  Production  Register  cannot  be 
proved  by  comparison  with  the  entries  of  the  General 
Exhibit  as  in  the  case  of  debits,  the  General  Exhibit 
containing  no  equivalent  accounts. 

Credit  is  given  to  ''Goods  in  Process"  in  the  Pro- 
duction Register  when  individual  orders  are  completed. 
To  do  this  the  total  respective  costs  by  departments 
of  finished  parts  (which  includes  castings),  raw  material, 
direct  labor,  and  diffused  overhead  charged  to  such 
order  number  must  be  determined. 

These  several  totals  covering,  perhaps,  one  or  more 
months  are  then  entered  under  the  corresponding  credit 
columns  of  the  Production  Register,  the  individual  totals 


Specific  Order  Production  171 

thereafter  being  shown  as  an  offsetting  debit  in  one  or 
another  of  the  columns  headed  ''Finished  Parts," 
"Finished  Product,"  or  "Various,"  according  to  the 
nature  of  the  finished  order.  In  Figure  20  the  totals 
shown  are  as  follows: 

Debit       Credit 
First  Month,  Order  No.  6433 $25.63 

Finished  Parts $  25.63 

Material  in  Process $     8.12 

Labor  in  Process 8.25 

Overhead  in  Process 9.26 

Second  Month,  Order  No.  6432 $  74.24 

"        "      6719 17.53 

"        "      7031 15.94 

$107.71 

Finished  Parts 107.71 

Parts  in  Process 28.19 

Material  in  Process 24.37 

Labor  in  Process 29.72 

Os'erhead  in  Process ^      25.43 

Third  Month,  Order  No.  6528 $112.03 

"      6764 41.17 

"        "      7503 122.28 

$275.48 

Finished  Parts 41.17 

Finished  Product 122.28 

Factory  Machinery  (404) 112.03 

Parts  in  Process 87.54 

Material  in  Process 28.51 

Labor  in  Process 88.77 

Overhead  in  Process 70.66 


$408.82     $408.82 


The  bookkeeper  will  get  his  monthly  or  periodical 
credit  entry  for  Goods  in  Process  by  means  of  a 
recapitulation  sheet  made  up  from  each  monthly  sheet 


172  Factory  Accounting 

of  the  Production  Register.  The  offsetting  debit  will 
be  taken  from  the  totals  of  the  distribution  columns. 
The  ''other  accounts"  may  be  taken  from  individual 
postings,  or  the  column  may  be  analyzed  and  the  totals 
for  each  separate  account  be  shown  on  the  recapitulation 
sheet. 

At  the  close  of  each  month  or  period  the  controlling 
record  will  be  filled  out  as  a  proof  of  accuracy  both 
as  to  the  footings  and  as  to  the  extensions  on  the 
individual  sheet  and  of  the  work  as  a  whole.  The  net 
value  of  each  order  in  process  will  be  carried  to  the 
right-hand  side  of  this  sheet  to  the  column  headed, 
''Values  Still  in  Process."  The  grand  total  of  such 
columns  embracing  all  departments  should  exactly  equal 
the  net  amount  sho^Ti  under  the  "goods  in  process" 
group  in  the  General  Exhibit. 

The  "goods  in  process"  group  of  accounts  is  perhaps 
the  most  important  group  in  the  general  plan  of  the 
cost  system,  if  one  can  be  classed  as  more  important  than 
another  where  each  and  all  are  necessary  to  the  finding 
of  actual  costs.  They  are  the  controlling  accounts  of 
the  General  Exhibit,  which  both  in  theory  and  in  fact 
"articulate"  more  closely  with  the  Production  Register 
than  do  any  other  records. 

A  mistake  in  the  Goods  in  Process  Account  is  more 
serious  than  a  mistake  in  almost  any  other  account, 
since  it  means  a  wrong  cost  computation  on  some  par- 
ticular part  of  the  product.  On  the  other  hand,  the 
possibility  of  error  in  the  Goods  in  Process  Accounts 
is  not  so  great  as  in  some  other  accounts,  because 
primarily  of  the  greater  care  taken  with  these  more 
important  accounts  and  because  the  origin  of  entries  is 
so  nearly  alike  in  both  the  Production  Register  and  the 


Specific  Order  Production  173 

Greneral  Exhibit  that  a  ready  proof  by  balance  is  at 
hand. 

Mechanical  Aids 

Under  the  *' controlling  record"  group  in  Figure  20 
may  be  seen  columns  for  "Totals  this  Month,"  "Inven- 
tories," "Totals  to  Date,"  and  "Values  Still  in 
Process. ' '  These  several  totals  are  arrived  at  in  various 
ways  according  to  the  mechanical  devices  employed. 
Where  a  perforated  card  sorting  and  tabulating  system 
(Figures  35,  36,  and  37  and  Figures  68  and  69)  is 
employed,  the  cost  cards  for  the  month  or  cost 
period  are  allowed  to  accumulate  in  front  of  a  guide 
card  bearing  the  production  order  number,  and  at 
the  end  of  the  period  they  are  removed,  one  order 
number  at  a  time,  and  put  through  the  automatic 
tabulator,  a  total  being  had  for  each  element  (parts, 
material,  labor,  and  overhead),  these  totals  then  being 
entered  in  the  Production  Register  under  "totals  this 
month."  If  the  device  be  equipped  with  a  quick-change 
electrical  "controller,"  these  cards  can  advantageously 
be  again  put  through  the  machine  so  as  to  accumulate 
the  grand  total  of  the  parts,  material,  labor,  and 
expense,  which  constitute  the  "total  this  month."  This 
grand  total  having  been  duly  entered,  the  cards  are  then 
temporarily  laid  aside  in  a  file  with  what  is,  called 
an  automatic  "stop  card"  between  each  production  order 
number.  When  the  last  order  number  on  the  sheet  has 
been  duly  recorded,  all  the  cards  for  that  sheet  are 
again  put  through  the  device  and  thereby  is  obtained 
a  page  total  for  each  element — parts,  material,  labor, 
and  overhead — together  with  the  total  elapsed  time. 

By   having   "stop    cards"    between    each    order   the 


174 


Factory  Accounting 


" 

- 

"^ 

" 

^ 

" 

" 

■^ 

"I 

■" 

-1 

■ 

UJ 

t- 

z 
2 

z 

!^ 

t- 

^ 

¥ 

. 

I 
zz 

• 
No.         Quai 

inW 

°iZ 

^Tr.                    191       r)rA..v 

z 
o 

H 
D. 

!^ 

u 
o 

c 
iil 

o 

UJ 

CO 
6 

z 

b 

Z 

_1S 

Z 
U 

0 
O 

"a 

IT) 

z 

1 

C 
U- 

<n 

c 
0 

a 
j: 
u 

3 
O 

UJ 

z 

2 

o 

Z 
c 

0 

1 

O 

c 

T5 

1 
O 
CM 

z 

C 

8 

CO 

-0 
X 
U-- 
Cfi 

<H 

1 
.3 

i 

IT) 

d 

z 

• 
i  LL  OF  MA  tRIAL  ^ 

w 

^t- 

PO 

w 

■+ 

pj 

OJ 

g 

IT) 

^^ 

o 

iri 

^r 

- 

CO 

u 

_1 
u 

h 

a: 
< 

L. 

o 
u 
2 
< 

z 

c 
g 

•D 

C 
UJ 

«j 
o 

c 
o 

,o 

r« 

10 

o 

C 
LU 
OJ 

c 

K 

1 

UJ 

1) 

i 

1 

1 

c 
o 

E 

(3 

a 
11 
U 

J3 

£ 
o 
O 
il 

0 

-c 

c 
2 

o 

0 

i 

in 

c 
11 

in 

ji 
0 
KS 

XI 

■o 
1) 

u 

5 

E 

0 

o 

0 

li 
J) 

3 

a 

1 

C 

a 
o 
en 

O 
1 

N 

15 

3 
<J 
UJ 

CD 

% 

J) 

LL 

J 

d 

2 

o 
o 

o 

ll 

<M 
O 

rO 
O 

1 

_ 

in 
o 

2 

N 
o 

O 

i 

o 

= 

£ 

CO 

^ 

- 

=  = 

_o 

£ 

4) 

u 

XI 

I 

i 

c 
i£ 

c 

1 

3 

o 

UJ 

I 

C£ 

<VJ 

- 

ID 

PJ 

CO 

^ 

- 

- 

- 

- 

- 

- 

- 

c 

3 
X 

3 
1 

O 
0 

_1 

0 

'Jo 
o 

o 
o 

0 
0 

_) 
t) 

nj 
CD 

1 

= 

-1 

a: 
o 

3 
(J 

q: 

m 
n 

CD 

X 

o 
0 

_J 

J! 

cS 

UJ 

o 

1 
r 

N 

CO 

N 

L 

§ 

i 

5 

5 

2 

•4- 

lO 

CO 

S 

2 

<o 

Specific  Order  Production  175 

device  automatically  stops  at  the  end  of  each  order; 
the  pressure  of  a  key  starts  it  again  when  desired. 
In  that  type  of  automatic  adder  which  is  equipped  with 
a  listing  attachment  there  is  no  stopping  of  the  mechan- 
ism; the  totals  are  automatically  printed  whenever  a 
*Hotal-card"  is  encountered.  After  this  the  device  pro- 
ceeds, automatically,  to  list  the  cards  of  the  next  order 
number.  "When  several  order  numbers  have  passed 
through  the  device,  time  can  be  economized  by  the 
operative  while  the  machine  proceeds,  by  removing  from 
the  machine  the  cards  for  those  order  numbers  and  filing 
them  in  the  'file  from  whence  they  were  taken,  this  time 
putting  in  the  file  an  indicator  of  some  kind  to  show 
which  cards  have  already  been  ''used."  Credits  are  then 
handled  after  the  same  manner. 

Another  mechanical  means  for  accumulating  totals 
is  a  seventeen-column,  unlimited-split  duplex  adding 
machine.  Where  this  is  used,  the  cost  cards  or  coupons 
or  paper  slips  need  not  be  punched,  as  they  are  not  to 
be  handled  automatically.  However,  the  card  drawers 
or  trays  are  handled  in  practically  the  same  manner 
as  previously  described.  The  machine,  "v^dthin  its  limita- 
tions, is  ''split"  to  accommodate  such  headings  as  are 
found  under  the  "cost  charges"  group;  if  this  be  impos- 
sible at  one  operation,  then  two  operations  must  be 
made  of  it.  The  cards  of  each  order  number  are  listed 
in  their  turn  as  described  in  a  previous  section,  the 
totals  of  each  order  number  being  "transferred"  to  the 
"lower  counter."  In  this  manner  the  elemental  totals 
of  each  order  number  are  arrived  at  and  also,  in  the 
lower  counter,  are  accumulated  the  colimin  totals  thereof. 
This  being  done,  the  cards  can  be  returned  to  the  card 
files,  the  subsequent  calculations  being  done  from  the 
Production  Eegister  and  the  adding  machine  strip. 


176  Factory  Accounting 

From  the  adding  machine  sheet  or  strip  the  elemental 
totals  are  copied  on  the  Production  Register.  Next 
the  adding  machine  sheet  or  strip  is  taken  to  the  adding 
machine  and  from  it  are  listed  the  totals  of  the  various 
and  several  items  of  elemental  costs,  listing  one  order 
at  a  time.  The  total  of  each  order  is  registered  by 
depressing  the  * 'transfer  total"  key,  the  effect  being 
that  while  the  total  is  printed,  it  also  is  transferred  into 
the  lower  counter  for  accumulation  of  the  column  total 
for  the  page.  When  a  ''transfer  total"  has  been  regis- 
tered, the  operator  tilts  back  the  carriage  to  see  the 
total  and,  in  another  part  of  the  "split"  keyboard, 
he  copies  such  total,  registering  it  in  the  upper  counter; 
to  this  he  adds  the  "total  debits  to  date"  of  the  previous 
month,  as  found  in  the  Production  Register.  He  then 
transfers  this  total  to  the  lower  counter  and  proceeds 
to  handle  similarly  the  credits  if  there  be  any;  if  not, 
he  proceeds  in  turn  to  the  next  order  number.  In  this 
way  he  arrives  at  "totals  to  date"  separately  and 
collectively. 

These  totals  being  entered  upon  the  Production  Regis- 
ter, the  "value  still  in  process"  can  be  mentally 
arrived  at. 

Where  no  mechanical  aids  are  present,  these  various 
operations  are,  of  necessity,  done  by  mental  calculation, 
each  order  number  being  "cross-footed"  to  arrive  at  the 
"totals  this  month,"  then  the  "totals  to  date,"  and 
lastly  the  "values  still  in  process."  The  net  difference 
between  the  total  debits  to  date  and  the  total  credits 
to  date  is  the  value  still  in  process  and  it,  therefore, 
should  exactly  articulate  with  the  total  of  the  "Values 
Still  in  Process"  column.  If  it  does  not,  then  the  dis- 
crepancy should  be  located. 


Specific  Order  Production  111 


Totals  to  Date  Value  Still 

Month  Order  No.  Debit  Credit  in  Process 

February     6432  $  67.46  $  67.46 

6433  25.63  $  25.63 

6528  57.71  57.71 


$150.80  $  25.63  $125.17 


March    6432  $  74.24  $  74.24 

17.53 

15.94 


6528 

90.32 

6719 

17.53 

6764 

36.89 

6927 

42.74 

7031 

15.94 

$  90.32 

36.89 
42.74 


$277.66  $107.71  $169.95 


April 


$112.03 

$112.03 

41.17 

41.17 

42.74 

$  42.74 

55.70 

55.70 

122.28 

122.28 

29.40 

29.40 

$403.32     $275.48      $127.84 


The  group  of  columns  headed  '^  Inventories "  is  not 
positively  essential  and  is  merely  a  memoranda  space 
for  recording  progress  of  the  work  where  such  informa- 
tion may  be  desired. 

SUMMAEY  OF  ExTEIES 
February  


Order  No. 

Time 

Money 

.6432 

16.6 
19.8 

$28.19 
12.47 

6.43 

5.81 

7.91 

36.4 

6.65 

$  67.46 

12 


178 


Factory  Accounting 


\ 

i                   i 

THE   ^AANUFAC■^JR1NG  COMPANY 

The  followwij  named  finished  parts  Ksve  been  received  from  Department 
and  stored  for  future  i&suance  on  Finished  Parts  Card. 

5i«r,r^l<eeper 

Date 

Shop 

Order 
No. 

Part 

Size 

For 

Machine 

No. 

No. 
Pieces 

Stored 

Price 

Value 

1 ! 1. 

— 1 

THE  MANUFACTURlNie   COMPANY 

- 

D?>te.                            191 

Coist  Department: — 

1  hand  you  herewith  the  following'  named 
matc'riar coupons  for  which  material  has  been  issued. 

Storekeeper 

- 

Order 
No. 

Goods 

mfVoce, 

Or 

STORE  ROOM    CR.                                                      [" 

,5     Iron 
C-st'^s 

Steel 
Cst^s 

Malt. 
Csfgs 

Brass 
Cst  gs 

Bar 
Steel 

Bar 
Iron 

Screws 

Sundry  ■ 
Material  - 

- 

- 

= 

1 

_ 

__ 



Fig,  45. — Storekeeper's  Receipt  for  Finished  Parts  (Upper  Figure) 
Fig.  46. — Siunmary  of  Material  Issuances  (Lower  Figure) 


Specific  Order  Production  179 


6433  27.8  $  8.12 

8.25 


9.26         25.63 


6528  35.6 

Totals  first  month 99-8 

March    6432  8.2 

6528  42.7 

6719  17.3 

6764  20.5 

6927  41.6 

7031  12.9 

Totals  second  month 143.2 


April   '. 6528  28.3  $12.25 


$22.40 

9.24 

14.25 

11.82 

57.71 

$150.80 

$     .65 

3.28 

2.85 

$     6.78 

$18.64 

13.97 

32.61 

$  4.85 

6.92 

5.76 

17.53 

$22.19 

8.22 

6.48 

36.89 

12.80 

16.09 

13.85 

42.74 

$  6.40 

5.18 

4.36 

15.94 

152.49 


46     $  21.71 


6764  6.3  $  2.67 

1.61  4.28 


180 


'^^actory  Accounting 

7328             47.4 

$16.10 

4.28 

18.95 

16.37 

55.70 

7503             81.8 

$42.95 
19.27 
32.74 

27.32 

122.28 

7591             23.4 

$12.75 
9.37 

7.28 

29.40 

187.2 

$233.37 

CHAPTER  XII 
process  production 

Characteristic  Features  of  Process  Production 

The  present  chapter  presents  the  subject  of  process 
production  controlling  records  on  a  purely  synthetical 
basis,  owing  to  the  wide  range  of  plans  and  methods  of 
analysis  possible  in  mass  production,  or  process  produc- 
tion, in  which  the  goods  under  any  specific  order  num- 
bers either  are  not  easily  distinguishable,  or  follow 
each  other  in  such  rapid  succession,  or  in  groups  of  such 
similar  characteristics,  that  the  product  can,  for  costing 
purposes,  be  handled  in  mass  more  conveniently  than  by 
specific  order  nmnbers. 

Where  a  process  system  of  records  can  be  used,  it  is 
simple  and  effective,  but  it  is  advantageously  employed 
only  with  products  of  reasonable  stability  as  to  produc- 
tion costs  and  conditions,  since  it  lacks  the  quick  sensi- 
tiveness to  cost  variation  that  a  specific  order  cost 
finding  plan  has. 

A  well-rounded-out  process  system  can  be  used  to 
advantage  only  in  processes  in  which,  under  the  condi- 
tions and  efficiency  standards  existing  in  the  individual 
plants,  maximum  possibilities  and  the  minimum  depart- 
mental working  requirements  are  known.  With  such 
processes  the  more  or  less  exact  sequence  in  the  move- 
ment of  goods  in  process  from  one  operation  or 
department  to  another  may  be  intelligently  anticipated, 

181 


182 


Factory  Accounting 


J 

II 

w 

^ 

.n 

f^K^  r<m(> 

*- 

in     mo 

t-iomo  r^ 

\  \ 

(lilt  O 

ONiOtOCD 

*-    «l 

fJl^W'^' 

N 

- 

y 

5 

c 

UJ 

■<}■  <D  ■*  OO  t-4 

N      Nin 

•^tn  c^J  cDO\ 

H(DO 

Cyty  H(\J  ■* 

n    H 

oi 

•<: 

! 

a. 

N     (Mn 
«o      low 

oi  c^0\  ^t  cu 

NOl  H 
■*H(V 

ScM--  in  tD 

t       CU 

ol      10 
CD       0. 

> 

C>  0- 

5' 5" 

Z.      .9 

J 

< 

'^ 

'^ 

■oo     <u 

1  s 

D 

2 
< 

5 

f- 
< 

s 

\\ 

•J) 

sit;  ? 

-fl 

5 

i2  «5 

1 

c; 
=i    .„ 

Sz 

CO 

>- 
10 

\    ' 

■ 

u- 

"-1 

iH 

It- 

U 

.^>-^o.T^n 

in     O      c« 

HSt-CVJ  CD 

•H 

HNOD      cti 

CUN03 

p- 

(0 

< 

woo  o  o 

>i      10       t^ 

OOOH  Mn 

ID 

O  H  H       H 

•a-cu  H 

oo 

0) 

4' 

a 

loiocon^ 

H       I^        N 

mNHtoio 

H 

CMin"*       10 

lomoi 

o 

eo 

i-l      t~      w 

M       0> 

C«,-l  H  ■«  »!■ 

•* 

inoJCM      * 

H       CD 

in 

N 

^' 

6 

z 

< 

H 

<M 

rij      H      CM 

H(MH       00 

10 

i~ a)n  ,-4  0) 

m     c\i      o 

^  vo  ln^.  c\) 

iOt-I       H 

H  (Oc^     to 

CO  NOOO 

10      o 

't- 

V) 

O  -J  HO  w 

n     (^     « 

a)rt  o  oin 

HO        O 

OHO        lO 

N^N^ 

N       H 

(11 

,  <^ 

H  -^  cj  in  H 

>       O       H 

CO  cvjHincD 

OOCA       ■» 

.  -  •*  N       N 

lo(\J  ^CM 

01        CO 

CM 

i 

< 

w  MO  r-o 

^        ^        OD 

CO  m  (uo  H 

om     H 

COlO  o       o 

CM  to  10  in 

■t      CM 

(^ 

V 

< 

n 

inn  CO     oj 

r-     a 

H  ^O  CU-* 

W-f        03 

.O  CMM       O.' 

H 

lO 

N 

H 

OJ 

M        -H 

H             !£ 

to 

n 

-^ 

<Q 

r-i 

^ 

u 

or 

H 

H 

^ 

1 

D 

E^ 

(M 

\0 

to 

10 

■ 

,,. 

IJ. 

«l 

•<^ 

J 

HHWODOv 

rf      n^ 

-f  H  t~  H 

n     o\n 

NN  N  COH 

o 

in 

)>' 

"3 

5 

00  O  CO?^  f- 

^        lACO 

CMVOOIO 

in      ™  H 

CD  HO  O  O 

c\i 

N 

r-  rt  1^  in  H 

t<%       NH 

to  MAN 

n       ION 

HHH  to  in 

ik:^ 

^- 

NO  a)(M  o 

(^     coo 

(\1  COCV  O 

to        H(U 

ON  O  ON 

in 

CM 

ib'N 

OJtNi       H  -t 

O             H 

CM 

lO 

N        ^CV 

<^ 

r> 

z 

H 

z 

H 

<n 

"1 

o 

? 

<t 

xz 

< 

tH 

W 

o 

2 

Jr 

CM 

en 

01 

CiJ 

e 

° 

>o 

« 

lO 

tt- 

,  I 

11- 

>. 

*i 

J 

incot^toH 

o     oocu 

Ntoiow 

N       CftNP 

NtOHN 

Ncno\     CO 

N  CU(^  m 

to 

m 

CD(^  Hr~o 

in     MO 

Hinmo 

H        <DHH 

^  cnoi  w 

^OO       H 

(Jl  COH-t 

(^ 

•<+ 

IN 

Hi 

t^  n  vo  in  vo 

ov      int^ 

inin-HC\» 

f-      0«q 

Oi  0^  (MCO 

tVOlCO       CM 

lOCO  NiO 

00 

(^ 

B 

y 

,-40h-  OJO 

(M      wo: 

inioON 

tOlO^H 

■OH-t       'f 

H  (VC\1 

N 

lo 

Z 

tyfu^H  w 

C\)        NH 

HP-  (Mh 

10 

N 

a 

^ 

r 

<vj 

^ 

j> 

lOt-Hint^ 

to     inin 

OCM(\JH 

m     Hio  ( 

IM  H  too 

H 

^■* 

r4 

<M 

•t^ 

z 

■HCDNnO 

10     ^-^- 

in  n  H0» 

10  CO  (\i  in 

m 

rt  N 

O 

to 

z 

in  in  ifO)  w 

in     o  •<* 

^  p-in<D 

N  NOO  ■? 

00 

lOH 

•i 

01 

N'4CDH 

t~      in 

H<^     p. 

m     f.     c 

COCDtOCU 

CU 

■«tCO 

<M 

't 

or 
4 

5 

H        H 

H       CD 

10               c 

WCMO 

H 

V4 

10 

CD 

T 

H 

o 

o 

to 
o 

\ 

o 

2 

° 

0 

« 

to 

10 

0 

flj 

10 

It- 

p 

!>-■ 

l>- 

<•: 

J 

CM  CDtOHO 

■*a;o     o 

^t  a\p- 10 

HCU  (MlO 

<1 

HHtO 

N    torn 

inioo\     10 

<M 

'  ' 

•J- 

1^  ^-•<l•cu^- 

in  i^cD     in 

in  COON 

CM  H  to  Q 

■> 

O  N  O 

Oi       HOO 

D  O  00       C> 

^ 

a 

ln  voo^  t^  rH 

ri  H^      O 

N  H  in  H 

>H-ff  O 

J 

to  a>N 

'f       Olio 

©inH     CO 

CD 

Z 

P 

CVJ  o  P-  CO  O 

(Mf-in     in 

(BCliMO 

(0  in  lo  in 

X 

inoo) 

«       <DH 

N  (MO       O 

^ 

Z 
1 

S 

H  i^N     m 

H  \0  ^      c\i 

"♦HtO 

in 

iX 

Cl^HH 

in     >fin 

CM  -^  (M      c^ 

Ol 

CD 

t- 

H 

lO 

<r 

lO 

ID 

J 

01 

< 

(r^ 

n 

n 

/  / 

n 

S 

" 

« 

10 

a 

<0 

\\ 

. 

l\l 

Process  Production  183 

and,  with  due  regard  to  possible  contingencies,  the 
goods  may  be  passed  through  with  reasonable  precision 
and  in  conformity  with  a  predetennined  plan.  Devia- 
tions from  schedule  time  may  be  troublesome,  but  will 
not  seriously  disturb  the  operations  of  the  system. 

** Goods"  in  this  sense  may  be  gaseous,  liquid,  or 
solid  and  the  processes  of  such  a  nature  that  these 
goods  may  be  handled  in  bulk  or  in  continuous  unbroken 
streams   rather  than  in  individual  units. 

Processes  adapted  to  the  operation  of  a  clear-cut 
process  costing  j3lan  must  involve  but  little,  if  any, 
special  work,  and  this  special  work,  where  more  or  less 
does  exist,  must  be  capable  of  being  cared  for  by  a 
specific  order  cost  finding  plan  applied  to  individual 
orders,  and  this  without  disturbing  the  cost  records  for 
the  major  part  of  the  product  under  the  process  plan. 

It  is  also  essential  that  the  processes  brought  under 
a  process  cost  finding  plan  be  such  that  the  material 
can  be  supplied  or  issued  in  quantities  capable  of  pre- 
determination or  of  subsequent  specific  demonstration, 
and  such  that  all  by-product,  usable  waste,  and  offal 
costs  may  be  properly  allocated. 

The  production  processes  w4iich  embody  the  foregoing 
requirements  and  in  which  the  process  plan  of  cost 
finding  is  employed  to  advantage,  may  be  enumerated 
as  follows:  ^ 

(1)  Mass  products,  in  the  preparation  of  which  the 
proportion  of  labor  to  material  used  is  fairly  standard, 
not  only  through  the  one  cost  period,  but  in  each 
recurring  period  as  well,  save  as  it  may  be  modified 
by  conditions  of  sufficient  permanence  to  be  recognized 
in  the  cost  percentages,  where  such  are  employed. 

Examples    of   this   kind   of   production   are   fustian, 


184  Factory  Accounting 

breakfast  foods,  common  soap,  manufactured  tobacco, 
angle  iron,  binder  twine,  fence  wire,  common  brick, 
cotton  cloth,  flour,  sugar,  commercial  gas,  varnish,  and 
other  similar  products  where  the  exact  amount  to  be 
produced  is  not  of  necessity  positively  predetermined, 
but  in  which  production  is  capable  of  being  conducted 
on  the  continuous  performance  or  "till-forbid"  plan. 

(2)  Standard  grades  of  product  where  each  successive 
order  has  to  a  large  extent  identical  or  similar  labor 
processes  or  operations  performed  on  material  similar 
as  to  general  characteristics  though  of  possibly  differing 
quality,  sizes,  or  colors.  The  processes  employed  are 
of  such  a  nature  that  the  volume  of  work  put  in  process 
may  be  made  up  of  a  greater  or  less  number  of  indi- 
vidual production   orders   of   clearly   defined  qualities. 

Examples  of  such  products  are  agricultural  imple- 
ments, furniture,  mixed  paints,  wire  nails,  shoes,  candy, 
tacks,  rope,  knit  gloves,  leather  gloves,  dress  goods, 
hosiery,  toilet  soap,  carpet,  harness,  meat  products,  etc. 

Depaetmental  Accounts 

Under  the  process  plan  departmental  cost  accounts 
are  kept  for  each  department  as  shown  in  Figure  9 
under  Group  G,  with  the  addition  of  an  account  called 
''Process"  to  the  Material,  Labor,  and  Overhead 
accounts  of  each  department.  In  certain  lines  of  produc- 
tion the  first-named  department  (Department  1)  is 
not  necessarily  an  originating  department;  hence  in 
such  cases  Department  1  will  have  a  ''process" 
account  as  well  as  the  others.  Wlien  goods  come  into 
a  department,  they  bring  with  them  the  costs  already 
incurred  in  the  preceding  department,  or  departments. 
This  charge  is  not  detailed,  since  details  may  always 


Process  Production 


18& 


TO  vSTOCK  KEEPER 


vSTOCK  REF^RT 


Report  Stock  on  hand  of  items  m 


'JhMt^sSljid^ 


Size  c-  Piece  No. 


Name  of  Article 


3 


Quantity       GJuanTitv     VaIu^O 
on  hand       orvc;st-d     ''*'"«" 


-^/f  X  V/^ 


^ 


IX. 


iaO% 


ioS 


y^c  K   -r/jx 


<V' 


v^ii^ 


m 


3 


n 


fffC   X    '/u- 


IS 


ISllof^ 


^ 


4 


11 


vT/ 


^^     X    ^/6 


P 


/fl^o 


41 


oit 


II 


^i^ 


yz,  X 


^/s 


I3A 


/JL?oj^ 


ii^'V/' 


/4 


/z 


^.a- 


^JASy/^ 


if§SSf^ 


^3 


/fy   X    -y^ 


1'^ 


^^I± 


(^(o\^^k 


li 


1^8    >^     ^fu 


I3l(f/u. 


'3l-]o'|i 


f3 


^ 


^ 


i^ 


sMi^ 


JIg/5F//; 


fg 


/I 


o^%  X    /^ 


f' 


27  ^^X- 


-^.y^'/^ 


^ 


2V 


^/ 


^/6 


e^T^^i^.^^' 


/27<yy 


i?^V/i 


/Z3o 


^     X    -^ 


l/l.t. 


^on% 


3^n 


:u= 


J 


ii 


:p,£2 


-  3 


/I 


^X^i^ 


Count    of   above   «Stock    must  be  actual   and  is  to    be  taken 
atter  4-    P.  M.    To   avoid   conijJ^^tp^ith  anyM^uances. 
vSTock  Cards    corrected    hfOj/^^^—^  N^^-fM^  ^G^ 


M^o 


Abiorbed  into  Variation  of^  Weights  and  Measures,  ExhitHt.^_  iia^^ 


Fig.  48. — Stock  Report 


186  Factory  Accounting 

be  found  in  the  records  of  the  preceding  departments, 
but  is  made  in  one  total  under  the  head  of  "Process." 

The  process  charges  to  each  succeeding  department 
are  the  actual  costs  of  the  labor,  material,  and  expense 
incurred  in  the  preceding  departments.  A  curious 
departure  from  this  principle  of  charges  at  cost  occa^ 
sionally  obtains,  under  which  profits  are  allotted  each 
department  and  charged  with  the  costs  of  succeeding 
departments.  A  typical  example  of  such  a  condition  of 
affairs  obtains  in  certain  shoe  factories.  The  procedure 
in  such  cases  will  be  similar  to  the  departmental 
accounts,  save  that  each  department,  after  the  first, 
must  be  treated  as  having  earned  its  profit  as  soon  as  it 
has  completed  its  part  of  the  whole  process  of  manu- 
facture. This  system  lends  itself  readily  to  the  prepa- 
ration of  detailed  and  accurate  accounts  and,  speaking 
generally,  violates  no  fundamental  principle  of  account- 
ing. It  is  important,  however,  when  preparing  the 
financial  accounts  at  the  end  of  each  period,  to  review 
broadly  the  general  position,  with  a  view  to  guarding 
against  partly  finished  goods  being  taken  into  stock 
at  a  sum  in  excess  of  actual  cost,  unless  there  is  every 
reason  for  supposing  that  the  manufacture  will  in  due 
course  be  completed  and  the  articles  then  find  a  ready 
purchaser  at  a  normal  price.  If  there  be  any  doubt 
under  either  of  these  headings,  a  reserve  should  be  made 
against  any  possible  loss  on  the  work  already  done  in 
the  earlier  departments  of  manufacture. 

Another  departure  from  the  principle  of  charges  at 
cost  is  practiced  very  largely  in  the  meat-cutting  indus- 
tries. Here,  as  a  rough  and  ready  means  of  arriving 
at  what  might  be  termed  a  general  "utilitarian"  cost, 
the  market  price  of  all  kinds  and  grades  of  cuts  is 
obtained  each  morning,  and  prices  from  this  list  are 


Process  Production  187 

used  for  all  departmental  transfers  during  that  day. 
Thus  is  brought  into  each  department,  individually,  a 
speculative  feature  over  which  the  departmental  heads 
have  no  control. 

There  would  seem  to  be  little  to  commend  either  of 
these  plans.  No  profits  are  made,  nor  losses  sustained, 
until  goods  are  sold,  nor  can  either  the  factory  as  a 
whole,  or  any  department  therein,  be  consistently  con- 
sidered as  making  a  profit.  The  factory  delivers 
its  product  at  cost  to  the  commercial  department, 
and  it  is  the  function  of  this  department  to  realize 
profits  for  the  entire  establishment.  The  province  of 
the  manufacturing  department  is  to  turn  out  goods  of  a 
desired  quantity  and  quality  at  as  low  a  cost  as  possible, 
and  when  this  is  done,  its  responsibility  is  at  an  end. 
The  departmental  cost  figures  cease  to  be  cost  figures 
when  they  include  an  element  of  profit. 

Standabd  Costs 

There  are  many  advantages  in  expressing  the  depart- 
mental costs  as  percentages  of  a  predetermined  list 
price.  With  the  list  price  of  each  product  as  a  basis, 
the  cost  of  material  and  labor,  and  the  overhead  expense 
in  each  of  the  successive  production  departments  through 
which  the  goods  in  process  pass  may  be  readily 
expressed  by  what  is  called  a  *' standard"  cost.  These 
standard  costs  are  worked  out  in  advance,  are  tested 
in  actual  practice,  and  no  change  is  necessary  until 
tests  or  the  balances  at  the  close  of  cost  periods  show 
variations  in  the  cost. 

For  example,  suppose  a  given  production  order  con- 
sists of  600  units  at  the  standard  list  price  of,  say, 
50  cents  each,  giving  a  total  for  the  production  order 


188  Factory  Accounting 

of  $300.00  list.  The  tabulation  of  percentages  will  then, 
perhaps,  show  the  cost  of  this  particular  product  in  the 
various  departments  as  follows: 


irt- 

Departmental 

ent 

Process 

Material 

Labor 

Overhead 

Total 

Costs 

1 

$38.60 

$15.80 

$11.50 

$  65.90 

$65.90 

2 

$65.90 

9.20 

8.60 

5.95 

89.65 

23.75 

3 

89.65 

7.80 

17.55 

12.25 

127.25 

37.60 

4 

127.25 

1.60 

10.80 

5.85 

145.50 

18.25 

$57.20 

$52.75 

$35.55 

$145.50 

The  advantage  of  expressing  the  departmental  costs 
at  standard  rates  lies  in  the  ease  of  calculation,  of 
recording,  of  comparison,  and  of  change  when  necessary. 

The  cost  standards  or  percentages  for  the  various 
departments  are  obtained  in  the  first  place  from  the 
records  of  past  cost  experience  and  should  be  approxi- 
mately correct.  Tests  are,  however,  made  from  time 
to  time,  first  to  demonstrate  the  accuracy  of  the  esti- 
mated percentages  and  thereafter  to  show  any  varia- 
tion of  cost  from  the  percentages  or  other  standards  as 
fixed.  At  the  end  of  each  cost  period  the  total  standard 
costs  (Figure  22)  shown  by  the  departmental  records 
must,  of  course,  closely  articulate  with  the  actual  costs 
for  material  issued,  labor  employed,  and  overhead 
expense  incurred  for  each  department. 

The  standards  once  properly  fixed  give  a  fair  average 
of  costs  under  normal  conditions.  Thereafter,  as  stated, 
tests  of  specific  order  number  or  lot  number  costs  will 
from  time  to  time  show  any  variations  from  the  average. 
In  each  particular  line  of  production  where  the  general 
plan  is  employed,  the  range  of  standards  must  be  suffi- 
ciently comprehensive  to  embrace  all  ordinary  variations 


Process  Production  189 

due  to  grades.  As  an  instance,  in  the  hog-producn 
industry  a  separate  class  standard  will  be  employee 
for  fat  hogs,  known  as  ''lard"  hogs  and  for  lean  of 
"bacon"  hogs,  inasmuch  as  the  "cuts"  differ.  Beyond 
this  there  may  be  further  classifications  by  range  of 
weights   and  possibly  by  live-stock  market  variations. 

In  such  cases  the  compilation  of  costs  as  shown  in 
Fig-ure  21  will  be  by  "cuts"  instead  of  by  departments 
and  will  necessitate  another  and,  perhaps,  reversed  plan 
of  diagram  wherein  standards  of  weights  and  prices  per 
unit  of  measurement  will  predominate,  resolving  from 
the  completed  whole  into  its  constituent  parts.  If  varia- 
tions are  found,  their  cause  is  determined,  and  if  they 
are  due  to  conditions  which  permanently  change  such 
costs  in  any  way,  the  percentages  or  standards  are 
changed  to  correspond.  No  change  is  made,  however,  for 
any  temporary  variation,  such,  for  instance,  as  in  a 
textile  industry,  might  result  from  a  chance  difference 
in  texture  of  material  necessitating  a  greater  or  less 
amount  of  labor.  Such  fluctuations  are  of  no  statistical 
value  and  are  not  reflected  in  the  standards. 

Standard  costs  are  the  mariner's  compass  of  a  busi- 
ness enterprise  showing,  as  they  do  from  month  to 
month,  the  proper  course  of  the  business  shijD.  Pre- 
determined costs,  although  of  immense  practical  value, 
are  subject  to  a  slight  disadvantage,  more  theoretical 
than  actual,  which  nevertheless  may  prejudice  adherents 
of  the  old  school  against  new  methods.  The  drawback 
is  that  predetermined  total  costs  do  not  exactly  agree 
with  actual  expenses  over  the  same  period.  Let  it  be 
remembered,  however,  that  the  lack  of  agreement  is  no 
more  important  than  is  the  lack  of  agreement  (except 
at  two  moments  of  the  year)  between  siderial  time  and 
mean  solar  time,  the  lack  of  agreement  between  standard 


190 


Factory  Accounting 


Fig.  49. — Departmental  Inventory 


Process  Production  191 

time  and  the  incorrectly  characterized  *'sun  time,"  the 
nonagreement  between  magnetic  north  and  true  north, 
the  nonagreement  of  the  Polar  Star  with  the  true  north, 
or  the  nonexistence  of  any  constant  true  north,  since 
even  the  axis  of  the  earth  vacillates.  Since  the  equation 
of  time  is  always  less  than  seventeen  minutes,  the 
difference  between  the  true  and  the  mean  time  is  of 
little  importance  and  brings  no  inconvenience  into  civil 
life.  So  it  is  with  the  arbitrary  figures  of  a  standard 
or  percentage  plan  properly  applied  (Figure  49). 

As  a  rule  the  standard  figures  approximate  the  actual 
costs  so  nearly  that  selling  prices  may  ordinarily  be 
based  on  them  with  entire  safety.  Their  chief '' function 
is,  however,  to  afford  a  basis  of  comparison  by  which 
fluctuations  of  cost,  whether  up  or  down,  may  be  clearly 
shown,  and  this  the  fig-ures  of  a  standard  or  list- 
percentage  plan  will  do.  If  efficiency  operations  are  in 
progress  which  should  reduce  costs,  the  management 
have  a  standard  by  which  any  reductions  attained  are 
sharply  sho^vn.  If  accidental  causes  increase  costs,  the 
test  will  show  this  increase  and  the  percentage  expres- 
sion will  show  its  amount,  and  the  management  may 
then  take  such  steps  as  they  deem  best.  The  cost 
system  will  indicate  the  conditions.  It  is  for  the 
management  to  determine  what  these  conditions  demand. 

Pkoduction  Eegisteks 

The  Production  Register  as  its  entries  are  shown 
in  Figure  20  has  more  particularly  to  do  with  the 
classes  of  product  which  require  varying  operations  on 
a  given  machine  or  bench  and  varying  lengths  of  time 
for  these  operations.  In  the  case  of  process  production 
these  conditions  do  not  obtain,  as  usually  the  operations 


192      .  Factory  Accounting 

are  more  or  less  common  to  all  the  machines  in  a  given 
group  or  section,  the  cost  unit  being  based  on  the  product 
of  such  group  or  section  rather  than  on  the  product 
of  any  single  machine.  ^ 

As  was  discussed  in  Chapter  IV,  concerning  the 
routine  of  an  order,  we  have  considered  the  advisability 
of  clearly  defined  records  of  progress  and  costs  sur- 
rounding the  industrial  order  as  a  unit.  Hence  it  is 
essential  that  no  matter  what  be  the  routine  of  order- 
issuance  in  the  particular  factoiy,  some  convenient 
means  must  be  provided  for  control.  In  the  main 
Figure  20,  with  fitting  modifications,  will  fill  this  need, 
the  various  phases  of  production  order  numbering 
being  described  as  follows: 

(1)  Numbers  Common  to  All  Departments. — ■ 
(a)  Where  the  individual  production  number  is  based 
on  a  customer's  order  and  several  departments  are 
concerned  in  the  execution  of  the  order  one  (or  more  if 
desired  for  classification)  series  of  numbers  will  carry 
throughout  all  departments,  as  in  the  case  of  shoes, 
candy,  boxes,  printing,  etc.;  and  (b)  where  certain  lots  of 
goods,  standard  either  in  whole  or  up  to  a  certain  point 
in  the  process,  are  put  through  in  predetermined  quanti- 
ties based  either  on  positive  sales  or  on  anticipated 
sales,  as  in  furniture,  soap,  iron  safes,  hosiery,  etc. 

(2)  Departmental  Order  Numbers. — (a)  Where  each 
successive  process  is  based  on  the  need  of  two  or  more 
production  orders  in  succeeding  departments,  as  in  the 
case  of  combing  wool,  spinning  yarn,  dyeing,  weaving, 
knitting,  etc.;  and  (b)  where  the  process  is  supplying 
the  needs  of  specific  orders  and  simultaneously  is  pro- 
ducing goods  for  stock,  either  as  '^filler"  or  in  anticipa- 
tion of  future  needs,  as  in  the  case  of  brass  and  small 


Process  Production  193 

grey  iron  castings,  etc.  It  is  less  confusing  in  these  cases 
to  liave  such  producing  departments  stand  squarely  as 
units   of  production  complete  within  themselves. 

(3)  Diffusion  without  Numbers. — ^Where  the  condi- 
tions are  such  that  there  can  be  no  clearly  defined  line 
of  demarcation  between  order  numbers  of  groups  or 
classes  of  material  or  goods  or  of  the  service  contributed 
thereto,  it  is  customary  to  spread  the  cost  of  such 
processes  in  some  manner  as  an  addition  to  overhead. 
This,  however,  departs  from  the  principles  of  accurate 
cost  finding  and  is  not  to  be  recommended.  Such  opera- 
tions as  nickel-plating  metals,  acid  baths  for  glassware, 
smoking  meats,  etc.,  can  be  costed  under  the  point 
system  explained  in  connection  with  Figure  29  in 
Chapter  XIII. 

(4)  Daily  Routine  Orders. — Where  the  production  is 
standard  and  continuous,  the  various  articles  of  product 
being  turned  out  day  after  day  with  no  written  produc- 
tion order  other  than  a  list  of  quantities,  based  upon 
customers'  needs,  as  in  the  case  of  bread  and  cake 
bakeries,  artificial  ice,  etc.,  the  chronological  date  is 
used.  Production  credit  in  the  case  of  bakeries  is  stated 
in  "counts"  of  4  or  8  cents  each,  and  costs  are  deter- 
mined "per  count"  based  upon  monthly  compilations. 

(5)  Machine  Numbers. — Where  the  production  is 
standard  and  continuous,  the  various  articles  of  product 
being  turned  out  day  after  day,  varying  in  pattern  or 
design  but  conforming  to  certain  well-defined  grades,  as 
in  wire  nails  or  in  automatic  screw  machine  product. 

(6)  Product  List  Numbers  or  Catalogue  Figures. — 
(a)  Where  the  product  is  standard  and  of  an  indeter- 
minate quantity  nature,  and  perhaps  on  the  "until  I 
tell  you  to  stop"  plan,  as  in  the  case  of  standard  agricul- 

).8 


194 


Factory  Accounting 


Process  Production  195 

tural  implements;  (b)  where  the  product  is  standard 
and  put  through  in  given  quantities  for  the  purpose  of 
checking  up  production  with  corresponding  time  reports 
or  piecework  coupons,  as  in  the  case  of  underwear;  and 
(c)  where  the  product  is  standard  and  material  is  used 
to  best  advantage,  perhaps  several  orders  being  executed 
simultaneously  according  to  the  judgment  of  the  cutter, 
as  in  the  case  of  wagon  parts.  Under  this  plan  any 
lumber  taken  from  the  piles  is  charged  to  the  department 
material  account  and  the  extensions  are  made  in  the 
office  at  a  rate  per  thousand  feet,  which  includes  the 
exact  measurements  for  the  finished  parts  and  a  margin 
for  waste  as  determined  by  experiment  or  by  the  expe- 
rience of  preceding  cost  periods. 

In  the  modification  of  Figure  20  to  fit  the  needs  of  a 
process  cost  the  method  of  distributing  the  overhead  will 
also  be  considered;  and  again  whether  or  not  complete 
costs  are  gathered  departmentally  and  transferred  pro- 
gressively from  one  department  to  another.  The  basis 
of  levying  the  charges  against  order  numbers  must  also 
be  considered — whether  the  operating  hours  of  the 
operator,  including  overhead,  form  the  basis  of  the  plan 
or  inclusive  costs  relating  to  the  machine  or  process, 
or  tonnage   (pounds)   or  measurement. 

For  a  modification  of  Figure  20  where  it  is  desirable 
to  keep  records  of  production  by  individual  machine 
numbers  and  simultaneously  to  arrive  at  a  total  for  the 
whole  division  or  department,  the  *' Material"  column 
will  be  retained  for  the  reception  and  compilation  of 
standard  costs  of  the  material  element,  and  the  ^'Over- 
head" column  for  the  expense  element,  possibly  as  a 
weekly  charge.  Labor  will  be  divided  broadly  into  two 
classifications : 


196 


Factory  Accounting 


(1)  Preparation. — This  should  show  the  time  con- 
sumed in  the  various  necessary  preparatory  operations 
which  may  be  coromon  to  all  products  passed  through 
the  machine  or  which  may  be  spread  over  but  one  or 
more  specific  products,  as  fabrics  on  a  yardage  basis. 


RETPORT  of  defective  work-  Cost  Department  Copy 


IDENfTinCATION  ■ 
hteme  of  Part_ 
Workman  No. 


-Casting  No.. 


. Department  No. 


-Order  No. 


.Foreman 


CAUSE : 

l.lmpei-faci-  Mafei-ial 
E,(fnparfec<  Pa.rf 

3.  Broken 

4.  Blow  Holes 


5.  Improperly  cored 
S.lmproperfy  laid  off 
7.  Spoiled  in  Machining 
e.Bad  Pit-tern 


9.0t>ier  causes 


DISPOSITION  OF  THE  GOODS  : 
Delivered  to Date. 


Defective  throu^  cause  No.. 
Fault  of  Department. 


Can  goods  be  used  elsewhere? 

Where? 


.For  what  use  ?. 


In  the  Cost  Department  the 
Order  Number  to  which  Maiterial^ 
Labor^etc.,have  been  charged, 
will  be  g'iven  credit  ais  per 
amounts  shown. 


rinished  PartsCr  $. 
Material  Cr. ». 

Machine  Time    Cr.  i  . 
Likbor  Cr.  $  . 

Expense  Cr.  $. 


Scrap  Account  Dr.  $_ 
Expense  Dr,$. 

o.s.sDifraie     Dr,  $. 


Entered  by. 


REPORT  OF  DEFECTIVE  WORK- Superintendent's  Copy 


identification; 

Name  of  Part 

Workman  No 


.Casting  No.. 


.Department  No OrderNo. 


ruLL   EXPLANATION  or  CAUSE  , 


Fig.  51. — Defective  Work  Report 

The  time  required  for  such  preparatory  operations  can 
b©  standardized  to  some  extent. 

(2)  Production. — This  should  show  the  units  pro- 
duced each  day,  week,  or  month,  and  the  machine  time 
consumed  in  their  preparation.     A  separate  subgroup 


Process  Production  197 

of  headings  can  be  supplied  for  each  of  the  several 
standard  qualities  which  the  particular  division  of  the 
plant  produces. 

In  the  case  of  weaving  and  knitting,  by  means  of  a 
totaling  line  under  the  ''item  lines"  allowed  each 
machine,  the  total  can  be  ascertained  for  each  quality 
for  each  loom  or  spinning  frame,  and  these  totals  can 
in  turn  be  summed  up  and  the  progressive  total  be  car- 
ried forward  to  and  include  the  last  machine  in  the 
particular  division. 

Peoduction  Summakies 

Where  machineiy  is  involved,  no  matter  what  the 
general  system  of  cost  finding  may  be,  it  is  essential 
to  the  management  to  know,  not  only  the  direct  and 
indirect  hours  of  labor  or  machines,  but  the  product  by 
units  each  day  from  each  machine,  as  well  as  the  time 
required  to  get  that  amount  of  product  out,  the  time 
expended  in  preliminary  preparation,  and  the  time  each 
day  that  the  machine  was  idle.  The  machine  report 
is  one  of  the  most  valuable  records  of  a  cost  finding 
system.  It  is  of  a  "telltale"  nature,  indicating  the 
pulse  beat  of  the  plant,  and,  properly  used,  constantly 
tending  to  an  increased  production  at  a  decreased  cost. 

The  importance  of  maintaining  a  definite  degree  of 
machine  efficiency  is  readily  understood  when  we  con- 
sider that  in  the  ordinary  well-equipped  plant  the  com- 
plement of  each  kind  of  machine  is  only  sufficient  for 
reasonable  operating  requirements,  and,  if  any  one  of 
these  falls  below  its  proper  output,  machines  or  equip- 
ment dependent  upon  it  for  work  must  also  fail 
similarly,  the  output  of  the  whole  plant  be  "held  up" 
or  diminished  in  proportion,  and  the  profits  fall  off  in  a 


198  Factory  Accounting 

much  larger  ratia.  The  average  employee  does  not 
recognize  this  fact,  nor,  unless  employees  are  upon  a 
bonus-earning  basis  or  in  some  other  way,  friendly  or 
financially,  interested  in  the  success  of  the  plant,  would 
it  appeal  to  him  if  he  did. 

Figure  23  is  a  form  of  machine  record  which,  properly 
used,  will  show  exactly  how  many  units  of  product  are 
being  turned  out  each  running  hour,  thereby  showing 
whether  or  not  the  machines  are  being  used  to  the  best 
advantage.  The  entries  on  the  machine  record  can  be 
made  from  the  daily  time  report  of  the  operator  of  the 
machine,  so  prepared  as  to  show  the  totals  for  the  day's 
record  of  time.  There  are  on  the  market  two  different 
types  of  mechanical  devices  for  making  positive  records 
of  machine  production  entirely  independent  of  the 
operator's  attention  and  protected  against  his  inter- 
ference. These  devices  are  electrically  operated,  and 
the  registering  device  usually  is  in  the  office  and  not 
at  the  machine ;  an  accurate  count  is  had  of  every  minute 
that  a  press  or  linotype  is  shut  down,  also  accurate  regis- 
tration of  impressions  on  the  presses  or  the  lines  on 
the  linotype.  They  are  operated  on  lathes,  box  making, 
moulding,  textile,  brick,  and  other  kinds  of  machinery. 
Such  registrations  can  be  copied  on  a  ruled  form  such 
as  Figure  23. 

Figure  24  presents  a  means  for  collating  the  produc- 
tion and  the  cost  of  individual  operations,  together  with 
the  net  yield  of  finished  product.  Under  the  heading 
*' Production "  is  listed  the  number  of  pounds  handled 
in  each  operation,  also  the  cost  of  such  handling.  These 
production  figures  and  costs  are  had  from  the  daily 
accumulations  on  the  Production  Register  or  from  the 
card  files  maintained  in  connection  with  it;  the  costs 
being  had  from  time   cards,   slips,   coupons,   or   other 


Process  Production  199 

media  through  the  identical  or  similar  chamiels.  By 
dividing  pounds  into  cost,  a  unit  cost  per  pound  is 
arrived  at  and  is  entered  in  the  first  column  under 
**Cost  per  Pound."  The  next  column  is  to  show  the 
average  cost  of  the  three  months  or  periods  last  past. 
These  two  columns  have  provision  for  recording  to  the 
fifth  decimal  of  a  dollar.  By  totaling  these  various 
operations  a  gross  unit  cost  is  had;  from  this  is 
deducted  wastes  disposed  of,  giving  the  net  material 
cost  per  pound.  To  the  material  cost  is  added  the  totai 
labor  and  the  total  expense,  the  grand  total  being  shown 
not  in  one  item,  but  in  three,  segregated  over  the  grades 
produced  in  the  same  ratio,  as  the  open  market  is  with 
reference  to  the  purchase  price  of  the  same  three  grades. 

At  the  right-hand  side  of  the  form  is  the  same  kind 
of  record  for  spinning  yarn,  handled  in  precisely  the 
same  manner.  It  is  from  the  average  cost  of  the  three 
periods  found  in  this  manner  that  the  standard  costs 
are  obtained  for  use  in  connection  with  wool  transfers 
from  stocks  to  the  spinning  department  and  for  yam 
to  stocks  and  out  again  to  the  fabric  dcDartments. 

Figure  25  shows  the  means  of  arriving  at  compre- 
hensive costs  per  unit  in  a  given  division  or  department 
in  the  weaving  of  various  qualities  of  carpets  and  sewed 
rugs,  such  as  body  brussels,  wool  wilton,  wilton,  etc. 
The  total  production  and  the  total  costs  having  been 
found  in  the  different  processes  by  means  of  a  Pro- 
duction Register  and  its  related  files,  they  may  be  col- 
lated on  a  form  of  this  character.  A  summary  can  be 
made  of  all  similar  departments  or  divisions  in  the 
plant  and  from  this  summary  a  sheet  compiled  for  each 
separate  grade  in  order  to  obtain  the  unit  cost  in  each 
separate  grade. 


200 


Factory  Accounting 


Figure  26  presents  a  form  to  some  slight  extent 
similar  in  its  operation  to  Figure  23  in  that  it  is 
self-contained  and  does  not  depend  upon  the  Produc- 
tion Register  for  its  fig- 
ures. Each  production  re- 
port issued  by  the  dye  house 
is  listed  in  this  form. 
A  feature  of  this  form  is 
the    transition   from   avoir- 


TIME  WC 

TURN  1 

5RK 
"HIS 

Man 

ON  J< 

SIDE 
No. 

PA 

3BS 
UN 

OtPARTMENI 

kY  ENDINQ 

NAME  — 

-J 

DAY 

ON 

OFF 

ON 

OFF 

ON 

OFF 

m 

MOM 

TUE 

WIO 

THU 

— 

FRI 

iSAT 

SUN 

ITUE 

WED 

THU 

FRI 

SAT 

SUN 

1     1 

ITP 

"• 

dupois  to  yardage ;  in.  other 
words,  the  goods  go  into 
the  department  on  a  ton- 
nage basis  and  are  deliv- 
ered from  the  department 
on  a  yardage  basis.  This 
state  or  condition  exists  in 
other  lines  of  production 
as,  for  instance,  toilet  soap 
when  it  is  pressed  into 
cakes  takes  count  instead  of 
weight.  Care  must  be  exer- 
cised at  this  point  that 
discrepancies  do  not  creep 
in.  This  general  style  of 
form  will  do  for  any  lines 
of  product  handled  continu- 
ously day  after  day. 
At  the  right-hand  side  are  cost  compilations  and  the 
affixing  of  unit  costs  to  the  various  fabrics  to  the  fourth 
decimal  of  a  dollar. 

Figures  27  and  28  represent  four  sections  of  a  large 
form  for  arriving  at  the  cost  per  ton  of  pig  iron.  In 
Figure  27  the  upper  portion  shows  (excepting  for  the 
foreshortened  portion)  th-e  days  of  the  month  from  the 


Fig,  52. — Time  Work  on  Specific 
Order 


Process  Production  201 

first  to  the  tliirty-first.  These  same  dates  are  presumed 
to  carry  all  the  way  across  the  left  and  right  upper 
portion  of  Figure  28.  Any  amounts  or  values  inserted 
in  Figure  27  (the  left  side)  represent  costs  and  any  in 
Figure  28  (the  right  side)  represent  the  yield  or 
production. 

In  this  form  (the  assembled  four  quarters  or  com- 
pleted whole)  is  entered  each  day  the  total  of  each 
ingredient  going  into  the  ''charge,"  and  on  the  same 
date  line  is  shown  the  weight  in  tons  of  the  various 
grades  of  pig  iron  produced.  At  the  end  of  the  month 
totals  are  drawn  for  each  column  upon  a  total  line 
prepared  for  the  purpose.  From  these  totals  losses  are 
deducted  and  percentages  detemiined. 

In  the  bottom  portion  (including  left  and  right  sides) 
recapitulations  are  prepared  for  costs  and  production 
respectively. 


CHAPTER  XIII 

CONVEaGENT  METHODS 

DEFINITIOISr 

In  different  lines  of  production  accountants  and 
system  exponents  have,  from  time  to  time,  evolved  plans 
embodying  effective  combinations  of  general  account- 
ing principles  and  have  coined  certain  names  therefor 
which  have  come  into  greater  or  less  use  as  ''systems" 
which,  to  the  layman,  might  seem  to  stand  out  clearly 
from  the  basic  plans.  In  the  main,  however,  these  sys- 
tems do  not  in  any  way  depart  from  nor  transcend  the 
principles  involved  in  the  specific  order  plan  or  the 
process  plan,  but  are  merely  the  concentration  or  con- 
vergence of  certain  predominating  points  in  each  plan, 
formulated  into  a  well-defined  method  of  handling 
details  along  lines  of  least  resistance  or  most  effective- 
ness. In  the  main  the  records  surrounding  the  use  of 
the  elements,  material,  labor,  and  overhead  are  nearly, 
if  not  precisely,  the  same  as  in  the  basic  plans. 

Different  conditions  exist  in  every  different  line  of 
production  (Figure  31  and  Chapter  XIV)  and  must  be 
studied  before  a  system  of  accounting  can  be  devised. 
A  superficial  view  of  conditions  may  indicate  one  plan, 
while  a  study  of  all  conditions,  including  the  "excep- 
tions" in  the  various  departments,  may  develop  the  fact 
that  another  plan  will  fit  in  very  much  better.  As  a  rule 
any  plan  must  be  adjusted  and  modified  to  overcome 

202 


Convergent  Methods  203 

the  various  difficulties  that  inevitably  arise  before  an 
effective  and  satisfactory  working  system  is  attained. 

Machis-e-Hour  axd  SoLD-Hoim  Plans 

The  machine  hour  may  be  described  as  the  distribu- 
tion of  manufacturing  costs  "through  the  machine"  and 
is  applicable  to  mechanisms  such  as  looms,  printing 
presses,  annealing  furnaces,  cranes,  and  practically  all 
sorts  and  kinds  of  machine  tools. 

Under  the  machine-hour  plan  rent,  light,  heat,  power, 
and  the  hundred  and  one  other  items  that  go  to  make 
up  the  usual  overhead  expense,  become,  for  the  most 
part,  direct  expense  charged  in  proportion  to  each 
machine,  or  group  of  machines,  the  total  affording  a 
basis  for  a  proper  machine-hour  charge.  This  charge  is 
"loaded"  on  the  product  of  the  machine,  or  group  of 
machines,  according  to  the  number  of  hours  such  prod- 
uct monopolizes  the  services  of  such  machine  or  any  one 
or  more  of  the  group  of  machines.  In  other  words,  the 
expense  applicable  to  a  machine  product  is  charged  to  it 
by  means  of  an  hourly  rate  for  the  use  of  the  machine. 

The  machine-hour  plan  of  cost  finding  has  a  wide 
range,  but  before  its  adoption  in  any  particular  case  a 
careful  study  of  conditions  should  be  made.  Where 
properly  applicable  the  machine-hour  plan  is  undoubt- 
edly the  most  accurate,  and,  once  installed,  the  simplest 
method  of  cost  finding.  The  difficulty  lies  mainly  in  its 
first  installation — in  the  determination  of  the  exact  pro- 
portion of  the  various  expenses  which  may  be  fairly 
charged  to  each  particular  machine  or  group  of  machines 
composing  a  unit. 

The  sold-hour  plan  is  a  method  of  applying  manu- 
facturing costs  to  product  on  the  basis  of  hours  of  labor 


204 


Factory  Accounting 


involved.  It  is  somewhat  analogous  in  principle  to  the 
machine-hour  plan,  but  differs  in  the  method  of  applica- 
tion, inasmuch  as  under  the  machine-hour  plan  the 
operator  is  considered  as  incidental  or  auxiliary  to  the 
operation  of  machines,  and  under  the  sold-hour  plan  any 


e 

z 

ORDER 

No. 

KIND  OF  WORK 

HOUHS 

PRICE 

AMOUNT 

o 

z 

o 

S 
CO 

z 

^1 

o 

2 

^ 

■ 

1 

o 

Fig.  53.— In  and  Out  Card.    Report  of  Work  Done 

mechanical  aids  are  considered  as  incidental  or  auxiliary 
to  the  work  of  the  operator.  In  other  words,  under  the 
machine-hour  plan  costs  are  applied  to  product ' '  through 
the  machine,"  while  under  the  sold-hour  plan  they  are 
applied  'through  the  machinist"  or  otherwise  through 
productive  labor. 

The  results  secured  under  either  method  are,  of  course, 
practically  identical,  i.  e.,  the  detailed  cost  of  product; 
and  under  both  methods  costs  are  charged  on  a  time 
basis,  but  in  the  machine-hour  plan  this  time  is  the  used 
or  **sold"  machine  hours,  and  in  the  sold-hour  plan  it 
is  the  used  or  ''sold"  labor  hours. 

Another  distinction  must  be  made  between  the 
machine-hour  plan  and  the  sold-hour  plan.     Under  the 


Convergent  Methods  205 

macliine-lioiir  plan,  costs  are  charged  through  each 
individual  machine,  or  through  groups  of  machines  called 
**  production  centers."  Under  the  sold-hour  plan, 
charges  are  not  made,  through  the  individual  operator, 
but  are  made  through  the  productive  labor  of  the 
department  as  a  whole.  In  the  one  case  the  costs  on  a 
particular  job  are  determined  by  the  number  of  hours 
it  occupies  the  operations  of  particular  machines,  the  cost 
varying  with  the  machine.  Under  the  sold-hour  plan  it 
is  determined  by  the  number  of  productive  hours  devoted 
to  it  without  regard  to  the  individual  by  whom  such 
service  is  rendered. 

In  choosing  between  the  two  plans,  when  either  may 
be  used,  the  proportion  between  expense  and  labor  in 
the  cost  of  the  particular  product  has  an  all-important 
bearing.  "WTien,  as  is  usually  the  case  in  machine  work, 
the  expense  involved  exceeds  the  labor  coat,  it  is  bet- 
ter to  base  the  calculation  on  machine  time;  but  if  the 
expense  involved  is  less  than  the  labor  cost,  it  is  better 
to  take  labor  as  the  basis  of  calculation. 

The  sold-hour  plan  necessarily  requires  a  record  of 
the  time  devoted  to  every  order,  and  there  is  no  means 
of  combining  or  grouping  orders  to  save  clerical  labor 
unless  costs  are  wanted  only  in  one  group  as  a  unit. 

The  sold-hour  plan  is  used  to  advantage  in  plants 
which  are  devoted  largely,  if  not  entirely,  to  special  work 
or  ''order"  work  of  such  nature  that  practically  all  the 
operations  in  each  department  may  be  performed  by  all 
employees  in  that  department,  and  in  which  the  assign- 
ment of  successive  orders  as  they  come  in  is  governed 
more  by  the  conditions  of  work  on  preceding  orders  than 
by  the  peculiar  skill  or  other  qualifications  of  particular 
employees.      Thus,    for   instance,    in    a   machine    shop 


206 


Factory  Accounting 


DaVe 


START 


^\Qn 


STOP 


Time 


Rate 


Cost 


Acct.  No. 


devoted  to  experimental  work,  perhaps  any  one  of  the 
machinists  employed  is  capable  of  undertaking  any  work 
coming  into  the  shop,  and  a  waiting  job  is  assigned  to  the 
first  man  who  is  at  liberty  to  take  it  up.  The  same  con- 
dition obtains  in  a  printing  office,  w^here  as  a  rule  work 
coming   into   the   composing   room  is    assigned   to   the 

first  available  compositor  with- 
out regard  to  his  qualifications, 
or  coming  into  the  pressroom  is 
put  upon  the  first  idle  press 
capable  of  performing  the  work 
without  regard  to  the  skill  of  the 
pressman  in  attendance. 

Where  work  is  of  this  nature, 
there  is  usually  a  fairly  well- 
averaged  rate  of  wages — a  con- 
dition necessary  for  the  proper 
w^orking  of  the  sold-hour  plan. 
Where  wide  variations  from 
average  exist,  the  plan  is  not  to 
be  recommended.  Thus  in  a 
plant  devoted  to  standard  work, 
each  operation  is  usually  given 
out  to  employees  who  are  spe- 
cially trained  or  fitted  for  that 
particular  operation  and  who 
can,  therefore,  accomplish  much 
more  in  a  given  length  of  time 
than  could  other  employees  in 
the  same  department.  As  the 
skill  of  these  operatives  and  the  importance  of  their 
work  vary  greatly,  there  is  a  cori-espondingly  wide 
divergence  in  their  wages,  effectually  preventing  the 
economical  use  of  the  sold-hour  plan. 


Office  Order  No. 


Shop  Order  No. 


Operation 


Fin. 


Unfin. 


Name 


No. 


Fig.  54.— Start  and   Stop 
Card.     One  Job 


Con/vergent  Metliods  207 

It  is  true  that  these  same  conditions  of  peculiar  train- 
ing or  skill  obtain  in  special  work  to  a  limited  extent,  but 
usually  wage  divergencies  in  such  work  are  not  sufficient 
to  prevent  the  fairly  accurate  operation  of  the  sold- 
hour  plan.  Occasionally  some  particular  job  may  come 
in  requiring  the  attention  and,  therefore  the  employment, 
of  a  specially  trained  operative,  who  may  be  paid  a 
higher  wage  than  his  fellows.  To  counterbalance  this 
some  few  lower-waged  operatives  or  apprentices  are 
almost  always  found  in  such  establishments,  the  general 
result  being  a  fairly  well-averaged  wage  rate. 

The  Point  Method 

When  a  workman  takes  lumber  or  other  material  and 
cuts  out  of  it  parts  of  possibly  four  or  five  units  of 
product  with  resulting  scrap  from  which  parts  for  other 
products  can  be  evolved,  the  proper  distribution  of  labor 
costs  and  the  material  costs  likewise  is  a  problem. 
Where  such  conditions  exist,  the  point  method  may  be 
used  to  advantage. 

Under  this  method  a  shop  order  is  used  covering  what- 
ever pieces  the  cutter  is  likely  to  get  out  of  his  mate- 
rial in  a  specified  time.  A  week  is  a  convenient  period, 
the  week-end  ordinarily  presenting  a  good  cleaning-up 
time.  For  the  first  two  or  three  days  after  the  plan  is 
instituted,  the  cutter  keeps  ' '  tab ' '  on  the  average  length 
of  time  devoted  to  each  part  of  his  product,  and  a  record 
of  his  time  is  made  by  ' '  points  "  so  as  to  establish  a  com- 
parative scale  whereby  the  labor  costs  may  be  equitably 
distributed. 

The  time  required  to  produce  the  largest  piece  of 
product  or  the  one  consuming  the  greatest  amount  of 


208 


Factory  Accounting 


PRESS  ROOM 


Pressma/r  No....... 

Wor/iS/i/>M>....:.... 

Total  Time 

C/ieckett  hy. 


Feet^fk. 


6 


labor  is  set  at  ten  points.  The  next  piece  by  comparison 
of  average  time  consumed  may,  perhaps,  be  properly 
fixed  in  the  scale  at  eight  points  and  so  on  down  the  line 
to  the  piece  consuming  the  smallest  amount  of  labor. 

A  count  is  necessary  in  order 
to  ascertain  the  total  product  for 
the  period.  This  may  be  an 
actual  physical  count,  or  the 
product  may  be  ascertained  by 
measurement  in  the  case  of  wood 
or  by  weight  in  the  case  of  metal. 
Assuming  that  we  have  under 
consideration  wood  parts  and 
that  the  week's  product  includes 
56  parts  of  ten-point  product, 
with  a  total  of  560  points;  183 
parts  eight-point  product,  with 
a  total  of  1,464  points;  79  parts 
of  seven  points,  with  a  total  of 
553  points ;  and  127  parts  of  two 
points,  aggregating  254  points, 
we  have  a  grand  total  for  the 
week  of  2,831  points. 

The  labor  cost  having  been, 
say,  $18.00'for  the  week  of  fifty- 
four  hours,  the  value  of  one 
point  is  easily  ascertained  to  be 
$.0064  and  the  time  consumed  per 
point  to  be  1.144  minutes ;  the  former  is  to  be  used  as  a 
basis  of  labor  costs  by  extending  the  points  on  each  part 
to  secure  the  labor  cost  of  such  part ;  and  the  latter  is  to 
be  used  as  the  basis  of  expense,  or  overhead,  under  any 
of  the  plans  of  expense  distribution  which  use  labor  time 
as  a  basis  of  diffusion. 


SB 


5» 


'2» 


Mil 


'■&«» 


Fig.   55. — Start  and  Stop 
Card.     Ten  Jobs 


Convergent  Methods  209 

The  material  can  be  apportioned  in  like  manner  either 
on  a  basis  of  "size"  points,  or  by  the  exact  measure- 
ments of  each  part  plus  a  percentage  loading  to  cover 
waste  on  actual  results,  this  percentage  being  obtained 
by  tests  each  month. 

If  stock  is  removed  before  the  end  of  the  week  when 
this  method  of  costing  is  practiced,  it  should  be  removed 
by  known  quantities  so  that  the  record  may  not  be  lost. 
In  the  case  of  parts  made  of  wood,  sheet  or  bar  iron,  or 
steel,  this  can  be  accomplished  by  trucks  mth  sides 
marked  or  scaled  in  such  manner  as  to  indicate  quanti- 
ties by  the  height  reached  on  the  scale. 

The  point  system  is  applicable  wherever  a  number  of 
parts  are  cut  out  or  otherwise  treated  at  the  same  time, 
as  also  in  any  operation  where  several  parts  which 
cannot  be  kept  separate  are  worked  on  by  one  workman, 
or  again  where  the  workman  cuts  material  into  any 
one  of  a  dozen  different  patterns  according  as  the  mate- 
rial may  cut  to  advantage.  Under  any  of  these  circum- 
stances the  point  system  not  only  gives  a  good  basis  for 
the  application  of  costs,  but  also  serves  admirably  to 
check  up  the  work  of  the  operative.  It  gives  a  positive 
record  of  the  goods  produced  from  a  given  amount  of 
raw  material  and  establishes  comparative  figures  by 
which  the  efficiency  of  the  workmen  may  be  readily 
judged. 

The  application  of  this  plan  to  nickel-plating  or  to 
acid  baths  of  any  nature  varies  slightly  in  details.  In 
the  preliminary  preparation  for  an  installation  in  the 
acid  department  of  a  glass-cutting  plant,  the  value  per 
pound  of  the  acid  mixture  is  first  determined  and  a 
table  prepared  of  values  based  thereon  from  1  to  100 
pounds  for  use  as  a  ready  reference. 

14 


210 


Factory  Accounting 


The  nmnber  of  pounds  of  acid  used  each  day,  as  peb 
the  daily  report  of  material  drawn  from  stores,  is  taken, 
and,  by  application  to  the  chart  of  acid  costs,  this 
quantity  is  reduced  to  a  money  value.  The  money  value 
is  then  divided  by  the  total  number  of  production  points 
for  the  same  day,  and  thereby  is  determined  the  ''acid 
cost"  per  point  for  that  day.  To  this  is  added  the  labor 
cost  and  the  expense  or  overhead  for  the  acid  depart- 
ment, and  the  cost  per  unit  will  thus  become  known  for 
the  day. 

Each  article  put  in  work  is  "rated"  at  its  proper 
number  of  points  by  a  person  of  experience  in  the  acid 
process  who  is  capable  of  judging  the  ''point  class" 
such  an  article  belongs  in.  A  classified  list  is  then 
made  after  the  following  form: 


POINT    CLASSES 

points 

5  points 

7  points 

Butterettes 

Goblets 

Compotes 

Pin  Trays 

Bonbons 

Nevo  Compote 

Mayonnaise  bowls 

710-7  Vase 

points 

Mayonnaise  plates 

7"  Nappies 

Wines 

5"  Nappies 

8"  Feet 

Sherries 

6"  Nappies 

9"     " 

Cordials 

Clarets 

6  points 

9  points 

Tumblers 

Colognes 

Ice  Tubs 

Footed  Sherberts 

Oils 

8"  Nappies 

Handled  Sherberts 

153-6  Vase 

No.  1  Fern  Dishes 

153-8     " 

9"  Nappies 

When  tests  are  made  from  time  to  time  and  it  develops 
that  certain  articles  are  rated  too  high  or  too  low,  then 
such  rate  is  changed. 

As  work  passes  through  the  acid  department,  the  num- 
ber of  pieces  involved  in  each  individual  order  is  multi- 


Convergent  Methods 


211 


plied  by  the  rate  per  piece,  thereby  arriving  at  a  total 
number  of  "points"  on  each  job.  These  totals  arc 
accumulated  each  day  so  that  a  grand  total  is  had  for  all 
jobs  for  the  day,  the  result  being  the  total  of  the  day's 
production  expressed  in  points.  These  daily  accumula- 
tions are  shown  on  a  peak  sheet  (Figure  29),  which  is 
used  as  a  means  of  determining  whether  jobs  are  prop- 
erly "rated"  or  not. 

Labor  and  burden  costs  per  point  are  based  on  pro- 
duction, expressed  in  points,  by  100-point  increases  at 
a  cost  of  $8.07  per  day,  this  being  the  twenty-fourth  part 
of  one  month's  cost  in  the  acid  room,  whence  this  record 
comes.  At  this  rate  1,000  points  cost  $.00807  per  point. 
"When  a  basis  is  arrived  at  after  this  manner,  a  table  is 
prepared  after  the  manner  here  shown,  wherein  it  may 
be  seen  that  increase  in  quantity  means  decrease  in  labor 
and  burden  cost  per  point. 


1000 

.00807 

1900 

.00403 

2800 

.00282 

1100 

,00734 

2000 

.00384 

2900 

.00269 

1200 

.00672 

2100 

.00366 

3000 

.00257 

1300 

.00621 

2200 

.00351 

3100 

.00252 

1400 

.00576 

2300 

.00336 

3200 

.00244 

1500 

.00504 

2400 

.00323 

3300 

.00237 

1600 

.00474 

2500 

.00310 

3400 

.00232 

1700 

.00450 

2600 

.00299 

3500 

.00229 

1800 

.00425 

2700 

.00288 

3600 

.00224 

In  Figure  29  there  are  three  separate  lines  used  for 
"peak  and  valley"  delineations.  The  first  column  repre- 
sents the  weight  of  the  predominating  acid,  the  second 
column  the  cost  per  unit,  and  the  third  the  production 
expressed  in  points. 

In  practice  colors  are  used  for  the  lines  as  a  ready 
aid  in  following  the  lines;  in  the  present  figure,  how- 
ever, in  place  of  green,  red,  and  black  for  the  succes- 


Z12  Factory  Accounting 

sive  columns  the  following  are  employed:  (1)  dotted 
lines  for  acid,  (2)  plain  black  lines  for  cost  per  unit, 
and  (3)  dash-and-dot  lines  for  production  expressed  in 
points. 

At  the  right-hand  side  of  the  figures  may  be  seen  the 
date  column,  two  columns  representing  the  pounds  of  the 
two  acids  delivered  in  carboys  to  acid  room  and  used 
(of  which,  being  mixed  in  the  vats  in  proper  propor- 
tion, but  one  need  be  considered  as  a  basis  of  measure- 
ment), a  column  showing  daily  records  of  points  proc- 
essed, and  last,  a  column  showing  the  cost  per  day. 
These  figures  can  be  compared  with  the  daily  registra- 
tion of  dots  on  the  chart.  It  may  be  noticed  that  on 
days  of  high  production,  like  the  fourteenth  day,  the 
acid  cost  is  also  comparatively  high,  whereas  the  unit 
cost  goes  low.  Conversely,  as  on  the  nineteenth  day 
when  the  production  was  low,  the  unit  cost  was  high. 

There  is  usually  a  reason  for  these  conditions;  pos- 
sibly a  small  volume  in  readiness  for  the  process  or,  on 
the  other  hand,  a  spurt  of  energy  resulting  from  a 
desire  to  get  out  certain  goods  by  a  certain  time  and 
perhaps  a  longer  length  of  time  spent  at  the  process 
than  usual  in  a  given  day.  In  any  event  the  facts  are  so 
pictured  that  whatever  conclusion  desired  may  be  drawn. 

In  applying  these  costs  the  monthly  averages  are 
usually  employed  as  embodying  all  the  variations  inci- 
dent to  the  process. 

The  Sheet  System 

Under  this  system  a  schedule  or  sheet  is  started  each 
day  with  orders  listed  thereon  sufficient,  if  possible, 
to  utilize  in  full  the  capacity  of  the  various  departments 
through  which  it  must  pass.    The  dates  on  which  such  a 


Convergent  Methods  213 

schedule  must  leave  the  various  departments  are  all 
determined  in  advance.  Thus  in  the  manufacture  of 
shoes  specific  orders  are  put  into  process  with  a  *Hag" 
to  accompany  each  case.  This  tag  constitutes  the  pro- 
duction order,  and  bears  the  relevant  data  concerning 
production  details,  and  follows  the  goods  from  start  to 
finish,  servdng  in  this  way  as  a  job  follower.  These  tags 
are  carefully  studied  and  arranged  into  daily  gi'oups 
(which  are  entered  on  sheets)  moving  through  the  fac- 
tory on  a  prearranged  schedule,  so  that  there  will  be  no 
localized  congestion  nor  interference  between  the  various 
specific  orders,  while  at  the  same  time  the  full  capacity 
of  the  plant  is  utilized. 

Shoes  are  required  to  remain  on  lasts  for  a  certain 
length  of  time,  and  in  order  to  make  a  minimum  number 
of  lasts  give  the  maximum  service  the  lasts  must  be  kept 
constantly  employed.  This  then,  is  the  ''neck  of  the 
bottle"  in  planning  the  proper  combination  of  shoe 
''tags"  for  a  given  "sheet,"  inasmuch  as  goods  cannot 
pass  through  subsequent  processes  any  faster  than  the 
lasting  process  permits.  To  keep  the  investment  in  lasts 
as  low  as  possible,  they  must  be  kept  constantly  in  use  by 
careful  planning  rather  than  have  congestion  seem  to 
make  necessary  the  purchase  of  additional  lasts  for 
shapes  which  quickly  become  obsolete.  To  do  this  neces- 
sitates an  "in  and  out"  schedule  for  each  size  and  shape 
of  last,  and  these  schedules  are  carefully  studied  that 
there  may  be  no  gaps  nor  overlaps  in  planning  their  use. 

Where  it  is  the  custom  to  take  orders  for  future  deliv- 
ery, there  invariably  are  customers  who  let  the  salesman 
pass  by  orderless  on  his  first  visit  and  frequently  on  a 
subsequent  visit  give  him  a  special  rush  order.  Where 
manufacturers  accept  these  rush  orders  indiscriminately 
and  put  them  in  process  under  special  stress,  the  factory 


214 


Factory  Accotmting 


IN 

OUT  . 

HR5 

AM 

ziroo 

MOM       ,5  , 

PM 

PM    1  ' 

1S^    53« 

t}.TM 

%^e^ 

"^^m"  9oo 

The  Hoistcr  Elevator  Works 

TIME  TICKET 

Name 

OMe. 

JOB 
NO. 

outside! 

INSIDE  1 

H«5 

MIN. 

HRS. 

MIN 

. 

1 

n 

— 



Correc+ : 

Foreman 

Fig.  56.— Start  and  Stop 

Card.      Written 

Description 


ceases  to  be  a  "manufactur- 
ing" proposition  and  becomes 
a  "job  shop,"  as  all  routines 
are  thereby  upset.  Certainly 
any  well-laid  plans  for  a  sheet 
system  would  be  upset.  There 
are  always  instances  where 
certain  customers'  needs  and 
desires  must  be  met,  no  matter 
how  unjust  or  unfair  be  the 
demands;  hence  provision  is 
usually  made  for  a  certain 
amount  of  rush  work.  If  each 
salesman  is  given  the  privi- 
lege of  a  limited  number  of 
"cases"  each  week,  he  can 
make  his  own  choice  as  be- 
tween his  customers  as  to 
which  shall  be  specially 
favored.  These  chosen  orders 
are  then  "tagged"  and  put  on 
the  single  "rush  order  sheet" 
for  the  week,  and  this  sheet  is 
given    precedence    over    any 


other  tags  that  are  awaiting  their  regular  turn. 


Block  System 

This  plan  is  to  some  extent  similar  to  the  sheet  sys- 
tem in  that  certain  groups  of  orders  are  put  through 
the  processes  of  the  factoiy  "on  time."  This  plan  gets 
its  name  from  its  similarity  to  railroad  dispatching; 
the  work  is  started  one  * '  block ' '  or  group  at  a  time,  and 
in  the  factory  processes  a  given  "block"  must  be  cleared 
up  before  any  w^ork  is  started  on  a  succeeding  "block," 


Convergent  Methods  215 

just  as  a  railroad  train  under  the  block  system  is  not 
allowed  to  enter  the  ''block"  ahead  until  the  ''clear" 
signal  is  displayed. 

The  present  plan  is  used  in  a  knitting  mill;  consider 
_'or  example  the  making  of  knit  gloves.  As  a  preliminary 
to  production  the  various  customers'  orders  are  care- 
fully  scrutinized,  and  compilations  and  totals  are  made 
of  each  style,  size,  and  color.  From  the  quantity  totals 
thus  arrived  at  production  orders  are  made.  Each 
production  order  representing  a  certain  style,  size,  and 
color  is  given  a  strip  of  coupons  numbered  perhaps  from 
1  to  15.  These  coupon  numbers  are  opposite  the  word 
"bag,"  as  they  are  subsequently  each  to  represent  a  cer- 
tain bag,  which  use  will  be  explained.  The  production 
number  is,  by  a  rubber  stamp,  affixed  to  each  coupon  of 
the  strip. 

A  given  number  of  production  orders,  for  example 
twenty-five,  are  chosen  according  to  the  certain  knit- 
ting machines  about  to  be  available.  These  numbers 
are  listed  on  a  "block"  sheet  (Figure  30).  Based  on 
this  sheet  an  order  is  sent  to  the  yam  departments  for 
whatever  yam  is  needed.  This  in  due  course  is  supplied, 
and  the  various  knitting  machines  take  up  the  work  as 
rapidly  as  preceding  orders  permit.  In  the  process  the 
knitting  machine  constitutes  the  "neck  of  the  bottle" 
in  that  no  subsequent  work  can  be  done  before  the  fabric 
is  knitted. 

At  the  end  of  each  day  or,  if  desired,  upon  the  com- 
pletion of  a  predetermined  number  of  yards,  the  knitter 
places  his  production  in  a  muslin  or  canvas  bag,  which 
in  turn  is  sent  to  the  cutting  department. 

Accompanying  each  "block"  is  for  each  production 
number  the  strip  of  coupons,  showing  bag  numbers  as 
previously  mentioned,  and  also  one  strip  of  coupons  bear- 


216 


Factory  Accounting 


■sr  8« 


»« 


RCPAiR  TIME  TICNE 


Repairing  t levator  for 


The  HoisTer  ElevatorWorkb 


Oriter  Reed  al_ 


Map  and 


Nature  of  Rcpat/5 


signature  oT  vlfcf4tfT 


Si^dlwre  otcustooier 


ing  *'bag  number  1"  and  the  consecutive  operation 
numbers  that  are  to  be  performed  in  the  making  of  the 
gloves.  The  separate  coupons  show 
the  operations  in  the  order  of  their 
precedence  (see  page  294) ;  also  they 
each  have  space  provided  for  a  num- 
ber of  dozens  and  pairs  finished 
together  with  date  and  piecework 
rate.  The  last  or  final  coupon  shows 
the  grading  of  the  finished  goods 
between  '^ perfects"  and  ''seconds" 
with  dozens  and  pairs  of  each. 

As  the  knitting  department  sends 
the  first  bag  to  the  cutting  depart- 
ment, the  operation  strip  is  inclosed 
therein;  then  the  clerk  detaches  the 
coupon  numbered  *'l"  of  the  ''bag 
number  strip"  and  sends  it  to  the 
production  manager's  office  as  an 
indication  that  "bag  number  1"  is 
on  its  way.  Upon  receipt  of  this 
coupon  in  the  ordinary  course  of 
events,  a  second  operation  strip  is 
sent  for  inclosure  with  the  second 
bag,  the  coupons  all  bearing  "bag 
number  2,"  and  in  like  manner  all 
subsequent  bag  number  coupons 
received  by  the  production  department,  excepting  the 
final,  are  the  signal  for  sending  the  next  operation 
strip.  When  the  final  bag  is  sent  to  the  cutting  depart- 
ment, all  the  remaining  unused  coupons  are  returned  by 
the  knitting  department  for  voidance  or  destruction  and 
also  as  a  signal  that  the  knitting  is  completed  on  that 
particular  order. 


Job  No 

The  MoisTer  Elevator  VVorks 

CuSTOMtn'i  TICKET 

Date 

Repatrs  or ^ Etevator 


Men 


Ttroe  of  dej>ert^rc 


1  Owerfimc  xiUfao  &haiveoCKK&- 


Tbbecontptfltc^ 


^'^tX.rca 


Fig.  57.— Start  and 

Stop  Card.    Outside 

Repair  Job 


Convergent  Methods  217 

The  production  department  office  retains  several 
carbon  copies  of  these  ''block"  sheets,  one  for  each 
department,  and  as  bag  number  coupons  and  subsequent 
operation  coupons  are  received  in  the  production  depart- 
ment office,  they  are  listed  on  the  proper  departmental 
sheet  under  the  proper  bag  number  column.  In  this  way 
progress  on  each  individual  "block"  in  each  separate 
department  can  be  carefully  traced. 

Where  production  on  any  production  order  is  held 
back  for  any  good  and  sufficient  reason,  the  individual 
production  order  is  transferred  to  a  "hold-over  block 
sheet"  so  that  the  main  portion  of  the  work  in  the 
"block"  may  be  brought  to  a  fitting  culmination. 

The  subsequent  operation  coupons  are  used  for  piece- 
work compilations,  and  it  is  for  this  reason  largely  that 
not  more  than  enough  for  the  operations  on  the  contents 
of  one  bag  are  given  out  at  one  time.  There  would  be 
the  possibility  of  confusion  through  overestimating  the 
exact  number  of  bags  that  were  to  be  involved ;  also  there 
would  be  the  possibility  of  misusing  coupons  with  dis- 
honest intent. 

The  Budget  System 

Broadly,  a  "budget"  may  be  defined  as  a  statement 
of  financial  estimates.  At  the  present  time  the  so-called 
"budget"  system  is  used  extensively  in  the  steel  fabri- 
cating industries.  A  company's  estimators  figure  on 
jobs,  and  on  a  fair  average  are  awarded  perhaps  one  out 
of  four.  It  is  sometimes  a  subject  of  debate  in  the  inner 
councils  of  the  business  whether  or  not  it  pays  to  go 
quite  so  deeply  into  detail  as  is  necessary  under  the 
budget  plan,  aud  yet  on  the  other  hand,  under  the  old 
guesswork  plan  if  money  was  lost  on  a  contract,  it  was 


218  Factory  Accounting 

never  known  where  or  how  the  loss  occurred.  Under 
the  budget  system  the  cost  data  are  filed  and  are  readily 
accessible,  and  when  bids  are  requested  on  similar  proj- 
ects, these  data  can  be  closely  scrutinized  as  a  basis  for 
matching  past  performances  with  past  and  present 
estimates. 

Material,  save  for  market  fluctuations,  is  fairly  stable 
when  plan  is  compared  with  performance;  labor  is 
usually  the  element  of  greatest  fluctuation,  and  this  car- 
ries with  it,  on  a  time  basis,  the  element  of  expense  or 
overhead. 

Upon  the  awarding  of  a  contract  it  is  assigned  a  num- 
ber. A  perforated  strip  of  forms  is  employed  embody- 
ing the  following: 

(1)  Acknowledgment  to  Salesman. — This  shows  job 
number,  customer's  name  and  address,  date  of  contract, 
date  to  be  shipped,  etc.,  together  with  commission  on  the 
order,  on  all  orders  this  month,  this  year,  volume  com- 
mission, etc. 

(2)  Notice  of  Work  Order  Issued. — This  portion  is 
for  the  general  manager  and  shows  job  number,  cus- 
tomer's name  and  address,  salesman's  name  and  com- 
mission, and  also  the  various  dates.  In  addition  to  this  it 
shows  a  summary  of  the  estimated  cost  as  follows: 

Labor   $   

Labor  overhead    

Material     

Material  overhead  @  ....  % 


Total  shop  cost $ 

Administration  and  sales  overhead  @  ....  % $ 

Total  cost  F.  0.  B $ 

Erection    $ 

Erection   Overhead    @ % 


Convergent  Methods 

Field  Test 

Permit  Bond    

Cartage    

Railroad  fare 

Board  

Freight     

Commissions   

Total  Cost 

Sold  for. .  .' 

Profit    


219 


COST  CARD 

Workman  No 


NAME 


Composing 

Distributing 

Alterations 

Job  Press 
Pony  Press 
Cylinder  Press 
Designing 


-Ems 
.Ems 
.Hrs. 


Ruling 

Binding 

Blocking 

Culhng 

Numbering 

Perforatip^ 

Dclivering.Dc. 


At  one  side  is  an  annotation:    *'At  the  close  of  the 

contract  you  will  receive  a 
detailed  comparison  of  esti- 
mated and  actual  costs  on  a 
sheet  of  a  suitable  size  for 
filing  with  this  notice." 

(3)  Cost  Comparison 
Sheet. — A  tabulation  having 
each  separate  shop  depart- 
ment shown. 

(4)  Work  Order. — This 
shows  job  number,  date  of 
contract,  date  received  at 
factory,  date  reserved,  date 
issued  to  shop,  and  date 
wanted,  customer's  name 
and  address,  shipping  direc- 
tions, terms,  delivery,  rout- 
ing, drawing  numbers,  etc., 
and  space  for  a  terse  de- 
scription. This  is  punched 
for  a  prong  binder. 

In  the  cost  department  a 


Order 
Rate- 


.Hours. 
Cost  _ 


STARTED 


STOPPED 


Ik-.'?.,! 


Correct. 


Supt 


Fig,   58. — Time  Stamp   Card. 
One  Job 


220  Factory  Accounting 

sheet  is  opened  with  the  contract  number ;  this  shows  the 
name  of  the  customer,  the  building  or  project,  the  archi- 
tect, etc.,  also  on  the  right-hand  side  in  the  financial 
record  section  the  date  and  contract  price.  As  payments 
on  account  become  due  under  the  agreement  and  are 
paid  by  the  customer,  they  are  entered  in  this  form 
under  a  *'Cash  and  Sundry  Credits"  column. 

On  the  left-hand  section  of  the  sheet  are  groups  of 
departmental  columns,  each  department  having  a  column 
for  labor,  material,  and  supplies  and  in  some  cases 
other  items.  In  this  section  are  kept  the  totals  as  they 
are  taken  from  the  cost  sheets  either  daily  or  weekly  as 
preferred. 

The  daily  cost  sheet  consists  of  a  considerable  num- 
ber of  columns  across  a  large  page.  This  sheet  is  pro- 
gressive during  the  month,  as  many  lines  across  the 
sheet  being  given  to  each  date  as  needed.  At  the  top 
of  each  column  is  shown  the  designation  of  the  item 
which  the  column  represents,  and  next  is  shown  the 
budget  allowance  for  this  item,  together  with  any  extras 
that  may  have  been  provided  for. 

Daily  time  reports  of  individual  workmen  are  posted 
to  the  daily  cost  sheet  item  by  item  separately.  The 
date  on  any  one  line  carries  all  across  the  page.  The 
lowest  line  on  which  appears  the  last  entry  of  any  one 
item  is  chosen  for  the  end  of  that  particular  date.  "When 
a  sheet  is  filled,  all  columns  are  footed  and  pencil  foot- 
ings shown  on  the  bottom  line ;  these  pencil  footings  are 
then  cross-footed  and  compared  with  the  total  of  the 
(daily  or  weekly)  footing  column  as  a  proof  of  accuracy. 

As  cost  figures  accumulate,  comparison  is  made  with 
the  budget  amount   (at  head  of  column)   of  each  indi- 


Convergent  Methods  221 

vidual  item,  and  in  some  cases  special  investigations  are 
made  as  to  why  costs  are  so  high. 

In  some  plants  a  '* superintendent's  cost  sheet"  is 
maintained.  This  is  a  large  sheet  somewhat  after  the 
generiil  style  of  Figure  83  (Expense  Analysis),  with  it^n 
numbers  across  the  top  after  the  manner  in  which  Figure 
83  shojvs  ''From"  and  ''Amount."  The  lateral  zones 
across  ihe  sheet  show  the  various  departments.  In  these 
little  rv^cording  spaces  are  posted  the  workman's  daily 
time  reports,  and  when  this  is  kept,  then  daily  totals  are 
taken  fiom  it  to  the  daily  cost  sheet. 

Under  the  budget  system  it  does  not  necessarily  mean 
that  the  cost  must  not  exceed  the  estimated  amount,  as 
the  work  must  be  produced  under  the  contract,  no  matter 
what  be  the  cost.  It  is  a  sharp  and  succinct  method  of 
watching  the  possible  variations  between  plan  and  per- 
formance, • 


PART  THREE— INDUSTRIAL  CLASSIFICATION 


CHAPTEE  XIV 

TYPES  OF  PRODUCTION 

Classes  of  Pkoduction"  Industeies 

Factory  production  may  be  divided  into  two  broad 
classifications  of  kinds  of  manufacturing: 
1.     Continuous.  2.    Assembling. 


TMEBAKIN6CO.    «k 

TIMF   RrPnBT  OF                                                                                       HTI 

- 

_        AS.M    rBO~5T«M5.Nl    T.«t.  M»«t   ~0  --» 

RKl  KLOW  T„,S  L.~t 

STARTED                 niisUis|  v»njf 

STOPPED               \ 

STARTED 

(FBOM  OTHEH  S4DE) 

STOPPED 

FOOTINGS  rOBWMJO 

TOTAL  TIME 

VALUE  AT         c*»  pc  twur 

Entered  on  \.abor  0>5lf.bot'0n  £ 
Entered  on  Employees'  Sufiflm*ry 

• 

Fig.  69. — Time  Stamp  Card.     Ten  Jobs   (Front  and  Back) 

222 


Types  of  Production  223 

These  with  their  various  subclassifications  are  sho"wii 
in  chart  form  in  Figure  31,  giving  two  typical  industrial 
examples  under  each  lettered  class  or  group.  The  letters 
used  have  no  significance  other  than  for  purposes  of 
re^dy  reference. 

There  may  be  combinations  of  the  various  classes  or 
groups  present  in  individual  plants,  necessitating  careful 
discrimination  and  reflection  before  urging  the  adoption 
of  any  given  plan  of  records.  As  often  told  by  ''mechan- 
ical aid"  salesmen,  we  are  familiar  with  the  prospective 
buyer's  argument  that  ''our  business  is  different";  to 
a  very  large  extent  it  probably  is  different.  Can  we 
readily  believe  that  the  economic  life  of  an  immense  com- 
mercial country  can  be  narrowed  down  to  any  all-embrac- 
ing formula!    Are  there  no  differences? 

Any  efficient  accounting  system  should  be  an  orderly 
and  logical  arrangement,  by  simple  processes,  of  the 
facts  and  figures  of  a  business,  in  order  that  it  may  con- 
centrate  into  clear  and  concise  statements  a  complete 
expression  of  the  activities  and  condition  of  that  busi- 
ness. If  mechanical  contrivances  after  careful  consid- 
eration of  all  phases  involved  can  be  made  to  fit 
gracefully  into  the  needs  of  a  well-devised  plan,  they 
are  aids;  otherwise,  they  are  nuisances. 

A  continuous  industry  is  one  in  which  the  raw  material 
is  practically  all  put  in  work  at  one  place  and  the  opera- 
tions required  to  change  that  raw  material  into  finished 
product  are  performed  in  a  continuous  or  consecutive 
manner  on  the  entire  mass  of  material.  The  raw  mate- 
rial singly  or  in  combination  goes  into  one  end  of  the 
plant  and  passes  through  various  machines  and  processes 
without  dependence  at  any  point  upon  the  concurrence 
of  other  material  or  parts  to  be  joined  to  it.    Upon  the 


224 


Factory  Accounting 


completion  of  such  production  the  finished  product  is 
ready  for  the  market  and  is  not  dependent  upon  other 
sections  or  parts  required  to  make  it  a  perfect  whole. 
Continuous  production  is  divided  into  two  classes: 

1.  Synthetic. 

2.  Analytic. 

An  assembling  industry  is  one  in  which  the  finished 
product  is  made  by  first  producing  the  various  parts  or 
ingredients  and  then  assembling  the  parts  into  the  com- 
plete whole.     This  type  of  production  uses  the  three 


TIME  EMPLOYED 


SEPT,25.19I6 
COMMENCED 


DATE 


JOB  No. 


MACHlhtt  SHOP 


Workman  No. 


^ 


Boring  CViUing       Qr\ndi\i\g 


¥ 


Planing  Tapping 


Stand&rdTime 


Chipping 


Facing 


MiUin^ 


Roi^hing 


Threadir 


e+f  rcTen'cy 


Cutting  Off 


Filing 


Mounting 


Shaping 


Turning 


Quantity. 


.Elapsed  Time 


.Rate. 


.Total  Ldbor  Cost, 


Fig.  60. — Elapsed  Time  Impression.    Machine  Shop 

physical  elements  in  fairly  even  proportion;  there  is 
required  a  manufacturing  department  involving  mate- 
rial, labor,  and  expense  to  make  parts,  and  another  set 
of  producers  to  join  these  parts. 
Assembling  Production  is  divided  into  two  classes: 

1.  Antecedent  preparation. 

2.  Eeciprocal  preparation. 


Types  of  Production  225 

Synthetic  Manufacturing 

"Synthesis'*  may  be  defined  as  composition,  or  tlie 
putting  of  two  or  more  things  together,  as  in  baking 
bread.  In  our  daily  life  we  consume  things  which 
have  passed  through  synthetical  processes.  A  bowl  of 
soup  and  a  pie  are  results  of  synthesis,  as  are  also 
underwear,  daily  newspapers,  and  telephone  service. 

A  further  subdivision  of  synthetic  industries  may  be 
made  between  those  which  have  resultant  by-products 
and  those  which  have  not. 

BY-PEODUCT    GROUP    (a) 

The  most  important  industry  of  the  by-product  type 
is  the  iron  and  steel  group.  It  affords  from  its  impor- 
tance and  natural  characteristics  the  best  example  of  the 
continuous  synthetic  industry  of  the  by-product  type. 

Three  main  ingredients  enter  into  the  production  of 
pig  iron :  iron  ore,  coke,  and  limestone.  Figures  27  and 
28  present  the  left  and  right  portions  of  a  monthly  sum- 
mary for  a  blast  furnace,  showing  the  details  by  days 
as  to  both  the  cost  and  the  yield. 

In  years  gone  by  nearly  all  coke  was  prepared  in  the 
vicinity  of  the  coal  mines,  and  no  by-product  resulted 
(coke  as  such  then  was  in  Class  D).  In  the  present-day 
march  of  progress,  however,  the  gases  which  formerly 
ser^^ed  to  make  useless  flames  are  now  carefully  hus- 
banded and  burnt  where  they  can  be  turned  to  good 
account.  Coke  is  now  quite  generally  made  in  by-product 
ovens  at  the  steel  plant. 

Coal  can  be  made  to  produce  three  valuable  by-prod- 
ucts aside  from  coke,  namely,  gas,  ammonia,  and  tar. 
Hence  in  connection  with  a  steel  plant,  the  coking  depart- 

16 


226  Factory  Accounting 

ment  has  apparatus  to  purify  gas,  collect  tar,  and  treat 
ammonia. 

Limestone  is  the  basis  of  slag,  which  comes  from  the 
blast  furnace  and  which  yields  some  further  by-product. 
Slag  at  one  time  was  a  source  of  expense  to  dispose  of, 
but  it  is  now  made  into  cement  and  fertilizer. 

NON-BY-PKODUCT  GROUP   (b) 

The  textile  industries  are  the  most  important  class 
of  the  non-by-product  group,  if  we  consider  volume  of 
production  and  contribution  to  the  wealth  of  the  country. 
In  addition  the  tobacco,  clay,  paper,  and  printing  indus- 
tries are  immensely  important. 

Into  the  textile  plant  is  brought  raw  material  that  is 
worked  upon  during  the  entire  time  of  manufacturing. 
Any  single  textile  industry  may  be  regarded  as  a  unit 
industiy  in  the  sense  that  the  entire  plant  is  devoted 
to  the  production  of  one  thing  only — the  working-up  of 
certain  fibres.  This  does  not  mean,  however,  that  there 
is  no  wasting  of  the  raw  material  as  it  passes  through 
the  various  manufacturing  steps.  In  every  textile  plant 
the  cleaning  and  the  handling  of  the  material  cause 
some  material  loss  in  every  machine. 

Figure  24  shows  a  list  of  steps  through  which  wool 
passes  to  be  made  into  its  different  finished  products. 
While  the  material  is  passing  through  the  various 
machines,  waste  occurs  at  every  stage.  In  the  combing 
process  these  are  classified  as  noils,  comb  waste,  card 
waste,  picker  waste,  and  burr  waste.  In  the  spinning 
process  there  is  hard  waste,  soft  waste,  fly,  and 
sweepings. 

Waste  spinning  is  an  industry  by  itself  and  requires 


Types  of  Production  227 

as  much  skill  in  all  its  branches  as  does  the  manufac- 
turing of  a  higher  grade  of  goods. 

In  production  which  is  done  largely  by  power  machin- 
ery the  grading  of  the  product  or  the  margin  of  profit 
depends  to  a  large  extent  upon  the  character  and  upkeep 
of  the  machinery,  which  involves  the  expense  element. 
Hence  we  may  consider  the  production  of  ordi- 
nary commercial  textiles  (as  distinguished  from  hand 
work)  as  being  dependent  most  largely  upon  the  expense 
or  equipment  element  for  classifying. 

Another  example  of  the  non-by-product  synthetic  type 
is  cut  glass,  which  differs  from  textiles  in  production 
characteristics.  In  this  industry  the  glass  *' blank"  is 
more  or  less  standard  in  quality,  and  the  grading  of  the 
product  is  entirely  based  upon  the  ability  of  the  indi- 
vidual ''rougher"  and  ''smoother."  Glass  cutting  as 
such  is  classed  as  synthetic  merely  from  the  fact  that 
the  "blank"  is  synthetic  production. 

Analytic  Manufacturin'G 

"Analysis"  may  be  defined  in  this  connection  as  the 
separation  by  arts  (in  distinction  to  what  is  produced 
by  nature)  of  a  compound  body  into  its  constituent 
parts.  Analytic  manufacturing  separates  a  raw  mate- 
rial into  its  commercial  constituents,  selecting  and 
assorting  them  into  primary  and  secondary  products 
and  waste. 

By-product  and  non-by-product  classifications  are 
present  in  analytic  just  as  in  synthetic  manufacturing. 

To  a  considerable  extent  the  by-product  of  the  syn- 
thetic group  may  be  the  result  of  preliminaiy  prepara- 
tion or  accessory  before  the  objective  production,  while 
in  the  analytic  group  it  is  produced  during  the  course 


228 


Factory  Accounting 


of  objective  production.  In  tlie  former  case  it  may,  in  a 
strict  sense,  be  considered  a  combination  of  two  or  more 
distinct  classes  of  production. 


BY-PRODUCT    CLASS     (o) 

The  most  important  by-product  industry  of  the 
analytic  type  is  meat  packing. 

In  Figure  5  under  ''assistant  superintendent"  may  be 
seen  the  main  production  departments  in  the  hog-prod- 


0/- 

A.M. 

TIME  TICKET 

No. 

Dept.  No.    U 

TirvtE  EMP 

PROD   ORDER  NO. 

.^ 

STORES  PROO.ORDER 

0  «  G                   ^D.  - 

MAR. 5  1916 
LOYELD                          COMMENCED 

SHOP  PROD.  ORDER 

SHOP  REPAIR  ORDER 

NO. 

TIME. 

NO. OF  P.O. 

RATE 

AMT 

TIME.  LIMIT 
EIXPELNSE  CHARGE 

MAN 

^s 

.4^0 

/■/Z 

MACH 

6 

.(o5 

/■^2- 

WORKMAN'S 
NAME 

NAME 

OPERATION  N 

D.gr                                NAME 

PART  NO.  XI 

UNIT  NO. 

Fig.  61. — Elapsed  Time  Impression.    Machine  and  Operator 

net  industry,  exclusive  of  slaughtering.  It  is  a  not 
uncommon  practice  for  packers  to  have  the  first  steps 
in  the  process  (slaughtering)  performed  by  a  separate 
organization  whose  sole  compensation  for  dressing  the 
carcass  is  the  offal.  This  in  itself  presents  sufficient 
material  for  an  extensive  business  in  bone  novelties, 
bristles,  sausage  casings,  glue,  fertilizers,  and  other 
derivative  lines. 


Types  of  Production  229 

A  distillery  may  be  considered  in  the  by-product  class 
when  it  maintains  a  cattle-feeding  department. 

NON-BY-PEODUCT  CLASS    (d) 

The  lumber  industry  is  an  excellent  illustration  of  the 
non-by-product  analytic  type.  Flour,  sugar,  and  similar 
forms  of  food  products,  also  liquors  and  beverages, 
belong  in  this  class;  they  are  in  the  main  extractive 
industries,  the  graces  of  the  production  depending 
entirely  upon  the  grades  of  the  raw  material  processed. 

Another  example  of  the  non-by-product  type  is  the 
cutting  of  precious  and  semiprecious  stones.  In  this 
production,  like  that  of  glass  cutting,  the  skill  of  the 
individual  operator  must,  of  necessity,  be  of  a  high 
order  to  produce  a  high-class  product;  hence  we  may 
consider  that  the  grading  of  this  product  is  based  largely 
on  the  labor  grading  involved. 

Glassware  is  classed  as  synthetic,  while  the  cutting 
of  precious  stones  is  analytic  in  that  it  is  a  reductionary 
process  on  material  originally  produced  by  nature. 

Antecedent  Assembling  Peepaeation 

''Antecedent"  is  defined  ae  that  which  goes  before  in 
point  of  time.  In  this  class  of  production  vast  amounts 
of  money  are  invested  in  patterns,  moulds,  forms,  dies, 
jigs,  templates,  and  other  auxiliary  supplies  for  pro- 
ducing constituent  parts  of  a  product  in  the  assembling 
class. 

To  this  class  is  properly  applicable  the  term 
** manufacturing"  as  contra  distinguished  from  building, 
fabricating,  constructing,  or  making,  in  the  sense  of 
processing,  individual  jobs  in  clearly  defined  quantities. 


230  Factory  Accounting 

"Manufacturing,"  in  the  sense  here  used,  means  the 
production  in  whole  or  in  part  of  a  standardized  article 
in  large  or  more  or  less  indeterminate  quantities  to  fill 
the  requirements  of  the  selling  department's  estimate  of 
probable  .output.  Phonographs,  sewing  machines,  type- 
writers, time  recorders,  etc.,  are  typical  of  this  class. 

The  cataloging  by  individual  concerns  of  different 
sizes  of  a  given  product  in  this  class  makes  possible 
the  production  of  certain  common  or  typical  parts  in 
much  larger  quantities  at  one  time  than  those  parts 
which  are  wholly  unique.  Incidentally  when  these  typical 
parts  offer  ''good  jobs"  at  piecework  prices  favorable 
to  the  workman,  it  is  not  unusual  in  loosely  organized 
plants  for  superintendents  who  show  partiality  or  "play 
favorites"  or  indiscretely  dole  out  "filler"  work,  to 
accumulate  many  more  pieces  than  current  produc- 
tion demands.  When  production  plants  are  under  effi- 
ciency or  financial  investigation,  this  is  one  of  the  points 
carefully  considered,  and  it  is  not  unusual  to  find  in 
individual  cases  more  parts  than  will  be  consumed  in  ten 
or  more  years  of  normal  production. 

One  characteristic  of  the  assembling  industries  of 
both  classes  is  that  the  goods  they  produce  are  made  up 
of  a  great  number  of  parts,  each  one  of  which  must  be 
separately  handled  and  treated  and  adjusted  to  all  the 
other  parts  of  the  completed  article. 

The  products  of  assembling  industries  are  in  them- 
selves objects  more  or  less  complicated  in  their  con- 
struction and  essentially  specialized  in  their  nature. 
They  have  a  great  amount  of  individuality.  They  are 
complex  and  various  in  constmction.  In  many  cases 
it  would  be  unprofitable  in  the  first  place  to  make 
machines  do  much  of  the  work,  because  the  machines 


Types  of  Production  231 

would  have  to  be  altered  at  frequent  intervals  on 
account  of  the  change  in  styles  and  of  the  improvements 
which  are  constantly  being  made  in  the  construction  of 
these  direct  consumption  goods.  In  the  second  place, 
machines  to  do  the  work  would  have  to  be  so  compli- 
cated that  long  periods  of  time  would  be  required  to 
evolve  and  develop  a  profitable  machine. 

Along  certain  lines  assembling  industry  plants  have  a 
larger  number  of  operatives  to  an  establishmeD,t  of  a 
given  size  than  does  any  other  group  of  plants,  due  to 
the  fact  that  a  very  large  amount  of  the  work  must  be 
done  by  human  labor  to  give  immediate  personal  satis- 
faction to  the  consmner. 

These  characteristics  offer  a  line  of  clea,vage  for  the 
further  division  of  the  antecedent  preparation  class  of 
production  into  fairly  well-defined  types. 

1.  Human  phase. 

2.  Mechanical  phase. 

HUMAN    PHASE    (e) 

An  instrument  like  a  piano  is  made  up  of  several 
hundred  pieces  which  must  be  carefully  adjusted  to  each 
other  to  evolve  the  perfect  instrument.  The  individual 
pieces  are  themselves  made  up  of  parts,  some  of  which 
in  many  cases  are  subject  in  a  greater  or  less  degree  to 
atmospheric  conditions.  In  order  to  get  beauty  in  work- 
manship and  a  trustworthy  article,  all  these  parts  must 
be  handled  with  discriminating  care  and  deftness. 
Machinery  can  cut  the  lumber,  twist  the  strings,  smooth 
the  ivory,  make  the  felt,  plane  the  pieces,  but  it  cannot 
assemble  them  without  intelligent  guidance.  This  prod- 
uct clearly  exemplifies  the  human  phase  of  assembling. 


232 


Factory  Accounting 

MECHANICAL   PHASE    (f) 


An  instrument  like  a  dollar  watch  is  made  np  of 
numerous  pieces  wMcli  must  be  carefully  adjusted  to 
each  other  to  evolve  the  perfect  instinmient.  Unlike  the 
piano,  however,  the  extreme  precision  is  exercised  in  the 
preparation  and  the  construction  of  microscopically  pre- 


TIME  EMPLOYED 

A.M. 
cok/imence:d 

Press  Room 

DATE 

JOB  TICKET  No. 

Make  Ready 

Sljpsheeting 

NAME OF JOB 

Running 

Bronz-in^ 

??^i5t?r'/'.S 

Changes 

Holding  Press     . 

COLOR  OF  INK 

Corrections 

Washup  and  Oiling 

NATURE  OF  FORM 

Delay  for 

CUTTING 

PRESSMAN'S  NAME 

TEiEDEB's  name: 

IMPREISSIONS 

Fig.  62. — Elapsed  Time  Impression.    Press  Room 

cise  punches  and  dies  and  highly  specialized  and  costly 
machinery  which,  without  the  wear  and  tear  and  subse- 
quent variations  incident  to  more  cheaply  constructed 
equipment,  turns  out  vast  numbers  of  parts  which  fit  and 
functionate  to  an  extremely  accurate  degree,  with  but 
simple  routine  assembling  labor  performance.  This 
product  exemplifies  the  mechanical  phase.  Articles  of 
this  type  are  usually  sold  under  a  veiy  broad  guarantee, 
and  where  individual  units  seem  to  work  improperly, 
through  no  fault  of  the  consumer,  an  exchange  is  made 
without  argument     Jeweled  watch  movements   which 


Types  of  Production  233 

take  on  the  human  phase  and  have  previously  been  more 
closely  inspected  or  tested  are  not  thus  readily  exchanged 
by  the  makers. 

An  industry  which  is,  perhaps,  somewhat  perplexing 
to  classify  properly  as  between  the  human  and  the 
mechanical  phases  is  that  of  men's  shoes  of  a  widely 
advertised  brand.  Here  highly  specialized  machinery  is 
in  itself  almost  human  in  its  functions  and  performs  its 
work  day  in  and  day  out  without  change  of  gauges,  and 
the  human  assistance  contributed  becomes  purely 
mechanical  on  the  part  of  the  operative.  There  is  not 
here  present  the  frequent  shiftings  between  sizes,  styles, 
and  other  characteristics  present  in  ladies'  extremely 
fashionable  shoes. 

Reciprocal  Assembling  Peepaeation 

Reciprocal  is  here  used  in  the  sense  of  mutuality  of 
purpose,  wherein  each  action  has  direct  reference  or  cor- 
respondence to  other  contemporaneous  actions  or  prepa- 
rations in  such  manner  that  each  affects  the  other 
and  is  equally  affected  by  it. 

In  this  class  of  producing  industries  the  material  is 
put  in  process,  is  worked  upon  and  assembled  without 
the  intervention  or  the  using  of  any  intermediary  steps 
which  do  not  finally  show  in  the  finished  goods. 

This  class  of  manufacturing  embraces  those  goods  or 
units  which  may  or  may  not  be  based  on  certain  geneiio 
principles,  but  in  which  the  extent  of  the  production  is 
scaled  precisely  in  accordance  with  the  customer's 
explicit  instructions.  As  a  minor  example  of  this  may 
be  cited  a  jobbing  machine  shop,  and  as  a  major  example, 
shipbuilding. 


234 


Factory  Accounting 


KlA.K4r                                                                                        No    ...                             1 

rie-OT-                                                            Ra 

.TE- 

Department 

Hrs. 

U\r\. 

PcWork 

Time  Work 

-^i?  p^y 

"^72    Py'srsVyTi^ 

<)3?    1  f^hofi^t'^rv 

S4.P      Rftilinrf 

;^5^    nrvinf?" 

^fi?     Milling 

37?    Wr^ppinf^ 

1  1  5   prwfjp.r 

f  ?.?,    P'='prM»'<^ 

^^4-  }-lan(ilin£  stores 

1 51    M?^'"hi"<=^ry  „ , 

7 18   Handling  product 

7Pp    '^t^b''* 

"THE  CLEANS 

INQ  SOAP  CO. 

Fig.  63. — DepartnLcntal  Eeport  Form  for  Reverse  of  any  Clock  Card 


Types  of  Production  235 

Engineering  or  designing  work  in  this  class  may  vary 
from  the  pattern  for  a  ballroom  slipper  to  the  plans 
for  a  forty-story  skyscraper.  These  are  not  made  to 
cover  the  production  of  a  series  of  years,  but  are  for 
specific  seasons  or  projects ;  if  the  order  is  secured,  the 
plan  or  design  already  used  in  securing  the  contract  may 
again  be  used  in  its  completion. 

This  class  of  industry,  although  having  a  very  great 
deal  of  machinery,  has  machinery  of  a  more  or  less  gen- 
eral nature  to  do  work  of  more  than  one  kind  or  size. 
These  machines,  of  necessity,  require  operatives  who  can 
adapt  them  to  do  new  work  and  who  must  guide  and 
direct  them  while  they  are  running. 

In  seeking  a  further  distinction  between  industries  of 
this  group  we  may  consider  two  classes : 

1.  Standard. 

2.  Special. 

STANDAED    CLASS    (g) 

** Standard,"  used  in  this  sense,  we  may  define  as  pre- 
determined routine  in  which  the  product,  perhaps  purelj 
seasonal  in  design  or  predominating  characteristics, 
adhers  strictly  to  prearranged  form,  color,  consistency, 
or  quality  of  constituent  elements  with  little,  if  any, 
departure  from  regular  routine  in  its  preparation. 

An  example  of  this  is  women's  shoes,  which  are 
designed  for  a  given  season  and  are  subsequently  made 
only  on  the  retailer's  specific  order,  embodying  a  certain 
range  of  sizes,  etc.  The  instability  of  fashion  with  its 
curious  whims  and  caprices  makes  the  predetermination 
of  requirements  as  to  constituent  parts  somewhat  of  a 
speculative  venture  (spoken  of  as  a  '* gamble");  hence 


236  Factory  Accounting 

it  is  not  usual  to  stock  up  heavily  on  uniquely  shaped 
parts  or  colors  for  purely  seasonal  shoes. 

A  standard  may  be  more  than  seasonal  in  scope  and 
may  be  of  a  permanent  nature,  covering  a  probable 
term  of  years.  An  example  of  this  is  certain  basic  parts 
of  a  steam  shovel.  A  steam  shovel  is,  in  its  operation, 
a  matter  of  considerable  cost,  surrounded  as  it  is  by  a 
crew  of  men,  continually  under  pay  while  working  or 
waiting.  If  a  part  breaks,  the  shovel  is  disabled  until 
a  new  part  can  be  supplied ;  if  the  new  part  be  not  stand- 
ard in  all  its  appointments,  confusion  and  large  costs 
are  the  inevitable  result.  The  digging  of  the  Panama 
Canal  developed  this  fact,  and  incidentally  it  marked  the 
superiority  of  American  shovels  over  those  of  older  for- 
eign types  used  during  the  first  attempts  at  excava- 
tion. To-day  in  the  building  of  steam-shovel  parts  if 
blunders  occur,  which,  in  the  individual  case,  might  be 
''patched  up,"  the  piece  is  scrapped  forthwith  and 
charged  to  Over,  Short,  and  Damage.  (See  account 
556.) 

In  this  class  certain  major  or  minor  portions  of  prod- 
uct may  be  carried  in  stock  as  *  *  finished  parts ' '  and  thus 
take  on  an  aspect  of  antecedent  preparation. 

SPECIAL    CLASS     (h) 

''Special"  in  this  use  has  reference  to  projects  or  con- 
trivances having  particular  marks  of  distinction  designa- 
ted in  words  or  plans,  in  order  to  distinguish  them  from 
every  other  project  or  contrivance,  and  having  positively 
determined  designations  of  limitations. 

Examples  of  this  class  are  ornamental  iron  and 
bronze  work,  art-glass  windows,  steel  tanks,  experi- 
mental machine  work,  etc.     This  class  is  the  technical 


Types  of  Production  237 

antithesis  of  manufacturing,  and  its  members  are  more 
properly  spoken  of,  perhaps,  as  pipe-organ  builders, 
steel  fabricators,  or  wagon  makers.  Before  the  advent 
of  automobiles  the  coach  builder  looked  with  disdain 
upon  the  product  of  the  carriage  manufacturer,  and  the 
bootmaker  in  like  manner  felt  contempt  for  the  prod- 
uct of  the  shoe  manufacturer.  We  see  in  the  present- 
day  advertising  claims  for  particular  merit  through 
the  ''loving  care"  exercised  in  individual  industries, 
which,  however,  takes  us  from  the  producing  to  the  com- 
mercial phase  of  business.  In  the  production  of  goods 
the  volume  of  'Moving  care"  is  measured  largely  by  the 
difference  between  cost  price  and  selling  price. 

It  is  in  this  class  most  largely  that  the  budget  system 
and  the  sold-hour  plan  of  cost  finding  are  most  effective 


PART  FOUR— PRODUCTION  ELEMENTS 

CHAPTER  XV 

material 

Physical  Audits 

All  business  is  a  conversion  of  assets  which  usually 
has  for  its  ulterior  purposes  a  final  exchange  into  the 
asset  with  which  the  process  ordinarily  starts,  i.  e.,  cash. 
If  the  business  is  successful,  the  amount  of  cash  realized 
on  the  completion  of  the  cycle  is  greater  than  the  amount 
of  cash  originally  invested;  but  in  any  stage  of 
the  process  the  values  on  hand,  whether  material, 
machinery,  labor,  overhead  expense,  etc.,  are  merely 
cash  in  another  form  and,  within  reasonable  limits, 
should  be  guarded  with  the  same  jealous  care.  As  a 
matter  of  fact,  in  some  modem  factories  material  is 
almost  as  closely  checked  as  cash.  A  similar  close 
checking  of  material  is  sorely  needed  in  many  other 
factories. 

To  the  solvent  manufacturer,  a  dollar  is  a  dollar,  no 
matter  what  state  it  be  in — money,  accounts  receivable, 
goods  in  store,  or  goods  in  process.  Workmen  do  not, 
as  a  rule,  have  the  same  wholesome  respect  for  twenty 
dollars  in  the  form  of  castings  that  they  have  for  twenty 
dollars  in  the  shape  of  a  gold  piece,  but  there  is  no 

238 


Material  239 

difference  in  point  of  value,  and  while  tte  same  kind  of 
care  is  not  required  for  each,  it  will  not  be  disputed  that 
proper  factory  management  will  guard  the  one  as  care- 
fully as  the  other.  For  the  record  of  the  one  the  Cash 
Book  is  employed ;  for  the  record  of  the  other,  the  Stock 
Ledger  (Figure  32). 

The  logic  is  not  clear,  but  the  fact  is  evident  that  while 
manufacturers  put  their  financial  officers  under  heavy 
bonds  for  the  safety  of  funds  intnisted  to  their  care, 
they  are  apt  to  ignore  completely  the  oftentimes  wanton 
waste  of  good  material  which  goes  on  day  after  day 
within  range  of  the  manager's  vision. 

We  may  perhaps  find  a  manufacturing  jeweler  guard- 
ing his  store  of  precious  metal  closely,  but  he  does  this 
because  of  its  high  intrinsic  value  and  the  ever-present 
resulting  danger  of  theft.  To  a  certain  extent  we  may 
find  brass  stocks  closely  guarded — a  careful  watch  and 
check  being  kept  on  parcels  carried  out  of  the  foundry 
or  factoiy  by  workmen.  Theft,  of  course,  is  always  to  be 
guarded  against,  but  this  is  not  the  form  of  loss  to  be 
feared  in  the  ordinary  factory.  It  is  waste  through 
spoilage,  misplaced  supplies,  improper  exposure,  in  other 
words,  losses  arising  from  carelessness  and  indifference 
rather  than  from  dishonesty. 

Material  in  stores  is  lost,  improperly  issued,  spoiled  by 
improper  exposure,  destroyed  by  careless  handling,  for- 
gotten, and  overlooked.  Material  in  process  is  lost  or 
destroyed  with  the  same  careless  indifference  or,  a 
costly  leak  when  not  prevented  by  proper  controlling 
records,  is  made  up  for  stock,  stored  away,  and  then  over- 
looked at  the  time  when  wanted;  or  the  discovery  is 
made  that  a  considerable  oversupply  exists.  Frequently 
the  wastage  from  material  lost  or  spoiled  is  not  so  much 


MO 


Factory  Accounting 


I m.CiuseNo 

2. n>.    -  _  " 

■9 m.   •     t 

4 m.   "■    r 


ELECTRIC  ELEVATOR  COMPANY 


DAILY  TIME  REPORT 

Employe^ 

No. V Time  Work  Rate-,. . . 

Dep't Date 


THIS  ePAce  roR  office  use  only 

Piecework h tT> ^ 

Time  Work H m ^ 


Total  Proauctiveh m 4'- 

Non- Productive  h m. ^. 


DELAYS  WHEN  UNDER  TIME  WORK  PAY 


S m.  Caust  No.. 

6. m.     -       ". 

7. m.     »      "  . 


Total  ....m.  4- 


6TOP 


START 


DU«     TIME 

va. 


Order  Na TimeWork-PieteWork 

Operation Quantity 


LABOR      OVERHEAD 


Order  No,. _ TW.      P.W. 

Operation Quantity 


L^BOR      OVERHEAD 


Order  No T.yV.      R  W. 

Operation Quantity , 


Oa*t    TIME 


LABOR       OVERHEAD 


order  No T.W.      P  W. 

Operation Quantify.  . , 


LABO«      OVEBHEAO 


orderNo. _..T.\N.     P.  V<. 

iDperatitm Quantity 


DttBl     TIME 


LABOR      OVERHEAD 


COOPONS  USED 


H 


Fig.  64. — Start  and  Stop  Coupons  for  Specific  Jobs  by  One  Operative  during 

One  Day 


Material  241 

in  the  intrinsic  value  of  the  material  as  in  the  work- 
manship and  expense,  or  overhead,  already  absorbed  by 
this  material — a  fact  frequently  lost  sight  of  in  plants 
lacking  a  cost  system. 

The  Stock  Ledger  properly  maintained  is  the  most 
effective  and  ever-present  method  of  detecting  losses  of 
material.  Some  of  the  sources  of  loss  have  already  been 
referred  to,  i.  e.,  wastage,  spoilage,  and  thieving.  A 
not  uncommon  variation  of  this  latter  occurs  where 
material  is  taken  by  the  workmen  to  replace  spoiled 
parts,  these  spoiled  parts  being  concealed,  destroyed, 
or  otherwise  disposed  of. 

Occasional  causes  of  loss — very  difficult  to  locate — are 
due  to  irregularities  in  the  purchasing  department.  Per- 
haps the  commonest  cause  of  such  losses  is  the  dishonest, 
or  more  mildly  expressed,  improper  practices  of  the  pur- 
chasing agent. 

Losses  of  this  nature  are  not  disclosed  by  the  Stock 
Ledger  and  can  only  be  prevented  by  the  employment 
of  men  of  a  high  standard  of  business  morality.  Other 
losses  in  the  purchasing  department  will  for  the  most 
part  be  shown  by,  or  be  prevented  by,  the  Stock 
Ledger. 

When  goods  are  paid  for  but  never  received,  it 
results  in  an  increased  production  cost.  In  plants  where 
but  one  line  of  goods  is  produced  and  the  cost  accounts 
are  limited  and  consist  mainly  of  Material,  Labor,  and 
Manufacturing  Overhead,  with  perhaps  a  few  subdivi- 
sions under  each,  such  losses  are  a  direct  charge  to  the 
Material  Account  and  would  probably  never  be  dis- 
covered. Even  in  plants  where  specific  costs  are  found 
and  a  going  inventory  is  maintained,  goods  billed  but 
not  received  sometimes  slip  through  the  Stock  Ledger. 

16 


242 


Factory  Accounting 


MIXING  LABOR                 THE  COLORED  PAINT  CO. 

USE  A  SEPARATE  SHEET  FOR  EACH  CLASS  OPLABOR  EACH  O^Y 

f\nr>rrv^^ri ,._,„. 

. Foireman 

Tr&A\  Tjm^,, Hrj   Wvr\9>.    (Tlost  $ 

1 

LEAVE 
THIS   BLANK 

ORDER  NO. 

QUANTITY 

STARTED 

STOPPED 

MRS 

MIN. 

VALUE 

MIXINQ 

MIXING 

**|VUX*NQ*** 

MIKtNq 

*'m*xiW** 

, 

MIXING 

MIXING 

MIX1N(4 

tXUm<k 

'muxm5<5**' 

*%u?i'nT" 

FiQ.  65. — Start  and  Stop  Coupons  for  Orders  Processed  by  One  Operative 

daring  One  Day 


Material  243 

In  such  cases  the  cost  of  the  missing  goods  will  not 
show  against  any  specific  shop  order,  but  the  loss  has 
been  incurred  just  the  same,  and  when  an  inventory  or 
check  up  (Figures  48  and  49)  is  made  of  the  particular 
class  of  goods,  and  this  inventory  is  compared  with  the 
record  of  the  Stock  Ledger,  the  shortage  is  uncovered. 
The  accountants  may  never  be  able  to  ascertain  just  how 
the  difference  occurred,  but  the  loss  is  there  and  must  be 
spread  over  product  in  some  way,  most  satisfactorily  by 
including  it  in  diffused  overhead. 

An  account  designated  '*  Variation  of  Weights  and 
Measures"  (Figure  9,  account  143)  is  the  barometer  of 
inaccuracy  or  dishonesty  which  shows  the  loss  on  goods 
missing,  stolen,  or  not  received.  To  this  account,  or 
preferably  to  its  counterpart  designated,  *' Reserve  for 
Variations  of  Weights  and  Measures"  (Figure  9, 
account  558),  is  charged  all  such  differences  as  they  are 
found. 

Every  factory  has  its  own  peculiar  ** waste  centers." 
Thus  the  cutting  room,  where  such  a  room  exists,  is 
usually  a  waste  center,  no  matter  what  the  goods  may  be. 
It  is  the  province  of  the  accounting  system  to  point  out 
these  waste  centers  and  to  show  just  where  the  waste 
occurs.  The  burden  of  correction  is  then  thrown  on  the 
management.  The  cost  system  will  disclose  the  leak,  but 
cannot  stop  it. 

The  prevention  of  unnecessary  waste  is  an  important 
and  even  vital  feature  of  low  costs  and  a  full  and 
economical  utilization  of  factory  capacity.  The  only 
positive  way  in  which  waste  through  blunders  may  be 
minimized  or  perhaps  prevented  is  through  a  form  of 
report  (Figure  51)  which  calls  for  a  specific  statement 
as  to  the  work  spoiled,  the  workman  responsible,  the 


244  Factory  Accounting 

department  and  the  order  number  in  which  it  occurred, 
and  the  name  of  the  foreman  in  charge.  This  enables  the 
superintendent  to  place  the  blame  where  it  belongs  and 
to  make  the  loss  a  part  of  the  workman's  efficiency 
record. 

An  account  designated,  **Over,  Short,  and  Damage,'* 
(Figure  9,  account  142)  with  its  correlated  reserve 
(account  556)  presents  a  means  of  absorbing  differences 
due  to  losses  on  material  through  poor  workmanship  or 
goods  in  process. 

Figure  51,  as  shown,  is  adapted  for  use  in  a  machine 
shop,  but  may  easily  be  modified  to  meet  the  require- 
ments of  any  other  line  of  production. 

Stock  Ledger 

The  Stock  Ledger,  also  called  the  '' Material  Ledger" 
or  the  *' Stores  Ledger"  (illustrated  in  Figure  32),  is  a 
perpetual  inventory  of  all  material  coming  in  and  of 
all  issues  of  this  material.  It  provides  for  an  account 
with  each  kind,  grade,  style,  or  size  of  raw  material 
carried  in  stock. 

The  department  in  which  the  Stock  Ledger  is  actually 
kept  is  not  a  matter  of  great  moment,  yet  it  will  usually 
be  found  desirable  to  have  it  in  close  proximity  to  the 
purchasing  department  so  that  it  may  be  referred  to 
readily.  There  is  no  established  form  or  shape  for 
this  ledger.  In  some  few  cases  a  bound  book  can  be 
used  to  advantage,  but  where  the  various  shapes,  sizes, 
weights,  and  numbers  of  units  run  into  the  thousands, 
the  bound  book  is  prohibitive  and  in  its  stead  either  the 
loose-leaf  ledger  or  cards  must  be  used.  Under  ordinary 
circumstances  the  latter  are  preferable  for  convenience 
and  quick  handling. 


Material  245 

*■ 

Where  cards  are  adopted,  stringent  rules  must  be 
observed  as  to  their  use,  for  while  cards  are  good  serv- 
ants, they  are  notoriously  bad  masters.  When  a  card  is 
removed  from  the  files,  a  dummy  showing  when  and  by 
whom  the  card  was  removed  should  invariably  be  left  in 
its  place.  If  a  card  is  kept  out  too  long,  it  should  be 
recalled.  If  some  such  system  is  adopted  and  rigidly 
enforced,  the  installation  will  be  successful,  but  if  a 
haphazard  use  or  misuse  of  the  cards  is  permitted,  mis- 
placed cards,  lost  time,  and  damaged  tempers  will  be  the 
sure  result.  Properly  used,  the  author  strongly  advo- 
cates cards,  but  unless  these  are  effectively  safeguarded, 
the  loose-leaf  ledger  is  preferable.  The  detailed  iiifor- 
mation  record  in  the  Stock  Ledger  covers  material 
received,  material  issued,  balances,  and  material 
ordered.  At  the  top  of  the  form,  whether  card  or  loose- 
leaf,  space  is  usually  reser^^ed  for  names  of  commodities, 
the  minimum  number  or  quantity  of  the  particular  article 
or  material  to  be  carried,  data  concerning  size,  location, 
etc. 

Under  ''balances"  appear  columns  for  date,  quanti- 
ties, average  price  of  units  on  hand,  and  total  cost  value. 
Two  additional  columns  are  sometimes  added  with  the 
headings,  ''Verified  by  Physical  Count"  (to  be  answered 
by  date  of  verification)  and  "Amount  of  Difference" 
(over  or  under).  The  Stock  Ledger  is  usually  "ruled 
down"  monthly  and  balances  on  hand  recorded. 

The  "Material  Ordered"  columns  can,  if  desired,  be 
arranged  so  as  to  show  date,  order  number,  amount 
needed,  and  quantity  ordered.  Items  entered  under  the 
head  of  "Material  Eeceived"  should,  of  course,  agree 
with  the  corresponding  entries  in  the  "Material 
Ordered"  column,  save  as  to  the  canceled  items,  if  any. 
When  goods  ordered  have  been  received,  a  check  mark 


246 


Factory  Accounting 


is  placed  in  the  check  column  under  ^'Ordered'*  and 
opposite  the  particular  item. 

The  details  of  a  properly  maintained  Stock  Ledger 
may  at  times  seem  tedious  and  tangled  with  much  red 

tape.  While  this  is  so,  if  the 
methods  are  right,  it  is  red 
tape  that  holds  substantial 
values  as  protection  from 
waste  and  disappearance — red 
tape  that  is  worth  while. 
When  material  is  closely  ac- 
counted for  by  a  Stock  Ledger, 
discrepancies  are  quickly  dis- 
covered and  finished  or  semi- 
finished goods  cannot  be 
overlooked.  The  Stock  Ledger 
will  show  any  discrepancies  in 
material  as  clearly  as  a  cus- 
tomer's account  will  show  a 
debit  balance.  The  Stock 
Ledger  will  also  show  just 
what  amount  of  money  is  tied 
up  in  raw  materials,  in  goods 
in  process,  and  in  store  stocks. 
To  reap  the  greatest  benefits 
from  the  Stock  Ledger  it  must 
be  kept  continuously  and  sys- 
tematically. The  Stock  Ledger 
is  not  merely  a  means  of  keep- 
ing track  of  the  stock.  This 
is  an  important  function,  but  beyond  this  it  will  enable 
the  manufacturer  to  adjust  his  stock  to  his  needs 
so  that  the  capital  tied  up  in  stock  is  reduced  to 
the   lowest   safe   figure.     Also,   if  properly  kept,    the 


OnderNo Date 

fbr                                           QvMinTity 

1                       UPSETtiNQ 

E^pfoY^  No. 

Stop 

R  stt  per  Hou»; 

ST*1 

Co»T  OT 
OpttraTion 

■■ 

3*TTW  op 

Rnw 

6top 

N" 

Storr 

Rate 

rimt 

?                     HEADING                         1 

ElTtplof  e*  No. 

itop 

Rite  per  H<VJr 

pfert 

Cofctof 
Oper»ti«i> 

Sitting  up 

n«w 

Slap 

No. 

SlirT 

Rat« 

fime 

3                  EYE   BENDETR                     1 

trndloYcef^Q. 

jTop 

R&t«per  Hour 

SbrT 

OpcraiTion 

S«T1inif  up 

Time 

Moj. 

r«» 

StM-r 

P«Te 

rime 

4                  StyltTHiNQ                       1 

prT\5>U»Ye«  No, 

STop 

Rale  p«r  Hour 

Sbrf 

Cs«Tot 
Operation 

Setrmjop 

r„M 

Slop 

No 

S»»rt. 

H»n 

Tine 

Fig.  66.— Start  and  Stop  Cou- 
pons for  Various  Operations  on 
One  Specific  Order.   Time  Work 


Material  247 

Stock  Ledger  will  enable  the  manufacturer  to  take 
monthly  "paper  inventories,"  approximately  correct, 
and  prepare  profit  and  loss  statements  each  month, 
showing  accurately  the  progress  of  the  business.  Where 
a  General  Exhibit  is  used,  the  controlling  account  shows 
synthetically  the  total  of  the  balances  in  the  Stock 
Ledger,  as  may  be  seen  in  Figure  15  under  *' Stores  and 
Stocks."  Where  a  controlling  account  is  used,  a  ''proof 
of  postings ' '  is  had  by  drawing  off  a  list  of  the  balances 
of  each  separate  account  and  comparing  the  net  total  of 
these  balances  with  its  synthetic  or  controlling  account. 
The  first  function  of  the  Stock  Ledger  is,  however,  the 
conservation  of  material — a  function  of  sufficient  impor- 
tance in  itself  to  justify  amply  the  maintenance  of  the 
record.  Not  only  does  it  effect  a  large,  direct  saving 
in  stores,  but  it  is  also  true  that  in  shops  where  material 
is  most  carefully  accounted  for,  losses  from  scrap  and 
waste  are  always  proportionately  light  and  the  general 
appearance  of  the  shop  the  best. 

PUECHASES 

Bequests  or  requisitions  for  the  purchase  of  material 
(Figure  33)  usually  emanate  from  the  stores  depart- 
ment. They  are  made  out  by  the  stores  clerk  or  some 
equivalent  official  and  are  sent  to  the  material  division 
of  the  cost  department  for  registration.  Here  by  ref- 
erence to  the  stock  record,  the  propriety  of  the  proposed 
requisition  is  determined.  If  the  purchase  is  approved, 
the  order  is  entered  in  the  ''Eecord  of  Goods  Ordered" 
(Figure  18),  where  one  is  kept,  and  the  request  for  pur- 
chases is  turned  over  to  the  purchase  department,  where 
a  purchase  order  (Figure  34)  is  made  out  in  accordance 
with  the  request  and  the  order  is  placed. 

The  completeness  of  the  information  conveyed  in  the 


248 


Factory  Accounting 


request  for  purchases  will  depend  entirely  upon  the 
system  in  force  in  the  particular  establishment.  Under 
some  systems  detailed  information  is  incorporated  in 
the  request,  as  for  instance,  the  number  of  units  on  hand, 
the  number  needed  for  immediate  consumption,  the  num- 
ber already  ordered  but  not  yet  received,  etc.     On  the 

other  hand,  requests  for 
purchases  are  sometimes 
mere  statements — each  un- 
der a  number  which  be- 
comes the  number  of  the 
corresponding  entry  in  the 
'' Records  of  Goods  Or- 
dered"— of  the  fact  that 
certain  goods  are  needed. 
The  purchase  request  must, 
of  course,  be  signed  by 
the  proper  party.  In  some 
large  concerns  two  or  more 
signatures  are  required  for 
the  validation  of  purchase 
requests. 

The  purchase  order  un- 
der any  modem  system  of 
business  organization  is  a 
printed   form   upon   which 
the  details   of  the  specific 
order  are  entered.     When 
these    have    been    entered, 
the  purchase  order  is  sent 
to  the  supply  house  or  con- 
cern from  which  the  goods  are  bought  and  becomes  its 
authority   for   the   delivery   of   the   goods    ordered,   in 
conformity  with  the  terms  of  the  purchase  order.    Therr 


UNDERWEAR  CO. 

BALMESH 
UNION  SUIT5. 

OPERATION 

OPtRKTCR  No, 

PAY  COUPON 

p  bord 
tthrds 
bf  up 
b  sew 
bbolc 
bm  label 
lacking 

f  con 

coll 

bindfnT 

f*cing 

batay 

tn  bak 

cut  n&f 

trnllc 

mknek 

turn 

seam 

cro  fly 

cuffs 

PBrd     U3ibm 

TThrds  UKbm 
B  se^'USibrti 

BHole    U3ibm 

BMLabd   Ulbm 

Tack        Ulbm 

FColl       UJbm 

Coll       U2ibm 

BindfntU33^tm 

Face        U2bni 

BStAy     U2bffl 

fNBack  U3bni 
CtNaFUVibm 

TNeedl  Ulbm 
Mknek  "Ui'bm 

Turn       Ulbm 

Seam  UI2bm 
Cro  Fly'U'3  hn 

Cuff*    02ibm 

1 

Fig.  67. — Piecework  Coupons  for 
Various  Operations  on  One  Dozen 
Garments.        Standard      Production 


Material  249 

is  no  fixed  wording,  style,  or  form  for  purchase  orders, 
the  matter  being  entirely  within  the  discretion  of  the 
individual  concern.  They  should,  however,  as  a  matter 
of  course,  be  as  clear,  direct,  and  specific  as  they  can  be 
made. 

Whatever  the  general  wording  and  arrangement 
adopted,  the  purchase  order  should  always  bear  a  serial 
number  and  a  request  that  this  serial  number  appear 
on  the  seller's  invoice.  This  is  a  matter  of  some  impor- 
tance for,  in  case  any  question  arises  as  to  the  authority 
for  an  order,  or  as  to  the  quantities  or  quality  on  other 
conditions  of  a  bill  of  goods,  it  is  a  simple  matter  to 
turn  to  the  duplicate  of  the  purchase  order,  which  is 
filed  under  a  serial  number,  and  determine  the  facts. 

The  purchase  order  is  usually  composed  of  a  set  of 
four  duplicates,  though  occasionally  purchase  systems 
call  for  sets  of  smaller  or  even  larger  numbers.  While 
commonly  referred  to  as  duplicates,  the  different  copies 
of  the  purchase  order  set  are  not,  strictly  speaking, 
duplicates,  for  while  the  specific  order  details,  which  are 
typewritten  in,  are  the  same  on  every  copy  of  the  set, 
the  printed  matter  usually  varies  on  the  different  copies. 
The  variation  in  the  printed  matter  is  sho\^Ti  in  Figure 
34,  which  illustrates  the  four  numbers  of  a  purchase 
order   set. 

The  different  copies  constituting  a  purchase  order  set 
are  prepared  at  one  operation  by  the  use  of  carbons. 
When  four  copies  are  prepared,  the  different  copies 
are  utilized  as  follows: 

1.  Sent  to  supply  house. 

2.  Filed  in  numerical  order  in  the  office. 

3.  Placed  temporarily  on  '^ Unfilled  Orders"  file. 

4.  Sent  to  receiving  .department. 


250  Factory  Accounting 

When  orders  are  important  and  to  be  closely  safe- 
guarded, the  blanks  constituting  the  set  of  four  copies 
are  printed  on  a  single  sheet  of  paper,  part  on  one  side 
of  the  sheet  and  part  on  the  other,  each  separated  from 
its  fellows  by  perforations.  Copies  1  and  3  appear  on 
the  face  of  the  sheet,  and  copies  2  and  4  on  the  reverse 
of  the  sheet,  in  such  manner  that  an  "accordion"  fold 
of  the  sheet  will  bring  the  consecutive  copies  in  sequence, 
all  facing  the  same  way  and  registering  so  that  when 
carbon  paper  is  placed  between,  all  four  copies  may  be 
prepared  in  one  writing. 

These  Purchase  Order  Sheets  are  machine  numbered 
and  padded.  If  a  sheet  is  spoiled,  it  is  destroyed,  save 
as  to  copy  2,  by  the  proper  officer  or  department  head. 
The  destruction  of  the  other  copies  is  tersely  recorded 
upon  copy  2,  which  is  then  filed  in  its  proper  numerical 
order  with  the  other  copy  2  purchase  orders,  so  that 
every  sheet  is  accounted  for.  This  plan  precludes  the 
possibility  of  promiscuous  or  unauthorized  orders. 

For  convenience  in  handling,  it  is  desirable  that  the 
different  copies  of  a  purchase  order  shall  readily  be  dis- 
tinguishable one  from  the  other.  For  this  purpose  when 
all  copies  are  printed  on  a  single  sheet,  different  styles 
of  type  or  different  colored  inks  may  be  used.  When 
copies  of  the  set  are  not  printed  on  one  sheet,  they 
may  be  distinguished  in  the  same  way,  but  are  best 
differentiated  by  the  use  of  a  different  colored  paper  for 
each  copy.  Sometimes  they  are  distinguished  by  the 
quality  or  weights  of  paper  used.  Another  excellent 
plan  of  distinguishing  the  different  copies  is  to  have  a 
large  designating  figure  printed  on  the  corner  of  each 
copy,  save  the  first. 

The  printed  wording  of  the  purchase  order  usually 


Material  251 

varies,  as  stated,  on  the  different  copies.  Thus  copy  1, 
the  original,  is  in  its  usual  form  a  direct  order  for  goods. 
In  addition  it  sometimes  carries  an  acknowledgTQent 
''extension"  on  the  left-hand  side,  separated  from  the 
purchase  order  proper  by  perforations.  This  acknowl- 
edgment is  to  be  signed  and  returned  by  the  party 
receiving  the  purchase  order,  and  if  properly  worded 
it  becomes,  when  so  returned,  not  only  an  acknowledg- 
ment of  the  order,  but  its  positive  acceptance  at  the  price 
and  on  the  terms  stated  in  the  purchase  order.  If  this 
acknowledgment  is  not  promptly  received,  a  request  for 
its  return  is  sent  out  by  the  purchasing  department. 

Copy  2  of  the  purchase  order,  the  office  copy,  instead 
of  reading  as  an  order,  may  perhaps  state  the  fact  that 
**an  order  has  been  placed  with  the  Johnson  Hardware 
Company  for  goods  listed  below."  In  addition,  as 
shown  in  Figure  2,  this  form  may  also  provide  blanks  for 
recording  the  subsequent  transactions  relating  to  the 
order,  such  as  ''date  invoice,"  "date  goods  received," 
"invoice  approved,"  etc.  When  these  blanks  are  filled, 
copy  2  constitutes  a  full  and  complete  history  of  each 
and  every  purchase  order.  These  data  should  be 
recorded  systematically,  the  copy  2  purchase  orders 
being  written  up,  perhaps  once  a  day,  from  the  accumu- 
lated invoices.  The  office  copies  of  purchase  orders 
should  never  be  removed  from  the  file,  reference  being 
made  to  them  when  necessary  in  the  file. 

Copy  3  is  usually  similar  to  copy  2  as  to  its  printed 
wording.  It  really  requires  no  special  data,  save 
under  the  one  head  "Date  Promised,"  as  it  is  placed 
on  the  unfilled  order  file  only,  serving  there  as  a  memo- 
randum and  a  reminder  of  the  order  until  the  goods  are 
received.  At  that  time  it  is  removed  and  attached  to  the 
invoice,  or  it  is  otherwise  disposed  of  according  to  the 


252 


Factory  Accounting 


system  in  use.  In  case  orders  are  but  partially  filled  and 
the  remainder  of  the  order  is  to  come  later,  the  received 
items  may  be  checked  or  othenvise  indicated  on  copy  3, 
which  is  left  on  the  unfilled  orders  file  until  all  the  goods 
it  calls  for  have  been  received  or  until  the  unfilled  items 
have  been  canceled. 

Copy  4  is  for  the  receiving  department,  and  its  printed 
matter  is  usually  worded  as  a  notice  to  the  receiving 
clerk  that  the  articles  listed  on  the  order  should  be 
received  from  the  concern  named,  on  or  about  the  speci- 


a/U-'/lo 


MAN  No 


73^ 


OPEnATIONNo/^^ 


ih 


ACCOUNT  Ho  s33 


DEPT.  No.    /^ 


MACHINE  N9.o2./^7 


LABOR 


±^m: 


££_ 


II 
!0 


•  o 

1  I 

2  2 

S3 

94- 


0  0  0 

1  I  I 

2  3  3 

93  3 
•4.4  4- 

5  5  5 

6  •& 
VVV 
8  0  8 

3  9* 


Otenliori 
X 
0  00 

[•TV 

2  3  2 

3  3  3 
44- 4- 
5  55 


7  77 

8  88 
3  9  6 


8flAf3fOTiMC^ 
____H2UMiTir*»    C 


Order 
OOO  0 


1  I  I  I 

2  22« 

3  3  03 


S  555 
•  6  fi  6 


7  7  7  7 

8  8  8  8 

9  9  9  3 


oo 
I  I 

2*1 
«3 

4  4 

5  6 

6  6 

7  7 
|6  8 

9  9 


O  0 

•  i 

z  •! 

3  3 
44 
55 
e  6 

7  7 
3  8 
9  9 


^j 


Ift 


Machine  Onrhuil    L»bor     T7m« 


M 


mm 


0  00 


I  I  I 

•  22 

3  3  3 


4  •« 

5  5  S 

6  6  6 


7  7«| 

8  8  8 

9  9  9 


0|0  0 


I.' I    I 

•'2  2 

313  3 


4i4  4 

s'.s  • 

6|6  £ 


7|7  7 

a|«8 

9|3  9 


9  s;9  9 


•  O;0 


1  III 

2  Z\% 

3  3*3 


•  - 
2  C 


4-41* 

5  SJS 

6  6;6 


7  7:7 

3  •Is 

9  9:9 


Fig,  68. — Elapsed  Time  Impression  and  Perforation 


fied  date.  On  this  copy  a  short-width  carbon  may  be 
used,  so  that  while  the  items  show,  the  quantities  of 
these  items  do  not.  This  forces  the  receiving  clerk,  in 
order  to  complete  his  record,  actually  to  weigh,  count, 
or  measure  all  goods  received,  instead  of  taking  his 
quantities  from  the  purchase  order. 

Copy  4  may,  if  desired,  have  upon  it  a  certificate  to  be 
signed  by  the  storekeeper,  or  by  the  foreman  in  cases 
where  goods  are  delivered  directly  to  the  department 
for  which  purchased,  stating  that  the  goods  have  been 


Material  253 

received.    The  final  resting  place  of  copy  4  will  depend 
upon  the  system  in  use. 

Automatic  Records 

A  certain  flat-platen  typewriter  equipped  with  enough 
adding  and  substracting  attachments  can  be  utilized  to 
post  items  to  the  material  ledger  cards  or  ledger  sheets, 
entering  individual  charges  and  credits  to  the  various 
accounts  involved  and  automatically  showing  up,  after 
the  entry  of  each  transaction,  the  remaining  quantity 
on  hand  and  its  money  value.  This  device  can  be  grace- 
fully used  in  conjunction  with  automatic  sorting  cards 
(posting  totals  therefrom)  or  with  manually  handled 
records  in  any  manner  desired  within  its  limitations. 
The  adding  and  subtracting  features  present  possibili- 
ties of  use  in  various  capacities  in  factory  accounting. 
In  the  use  here  stated  concerning  the  Material  Ledger, 
it  can  be  made,  in  addition  to  the  features  mentioned, 
also  to  accumulate  a  total  money  value  of  all  items 
posted,  thus  proving  the  accuracy  of  the  posting  work. 
For  example,  the  charges  to  order  numbers  as  shown 
on  Figure  47  must  have  offsetting  credits,  as  listed 
in  the  lower  right-hand  corner  under  the  caption 
'^Summary."  The  posting  to  the  Material  Ledger  may 
be  done  previously  or  subsequently  to  the  assortment 
by  order  numbers;  under  ordinary  circumstances,  it 
is  better  to  post  the  credits  first,  so  that  the  material 
card  may  rest  in  the  order  number  files  undisturbed. 
In  either  case  the  posting  of  items  listed  on  Figure  47 
to  the  * 'foundry  material"  section  of  the  Material 
Ledger  will,  if  accurately  done,  aggregate  $6,918.12; 
hence  a  proof  of  accurate  posting  is  had  both  as  to 
Goods  in  Process  charges  and  Material  Stores  credits. 


254  Factory  Accounting 

This  operation  does  not,  of  course,  prevent  the  posting 
of  an  item,  or  items,  to  the  wrong  account  under  the 
proper   classification. 

Figures  35,  36,  and  37  respectively  represent  cards 
used  on  automatic  sorting  and  adding  machinery.  The 
forms  presented  are  used  in  connection  with  material 
and  will  be  further  described  in  a  succeeding  section. 

A  card  carefully  designed  for  each  intended  use  and 
correctly  punched  to  indicate  the  facts  which  it  is 
desired  to  classify  and  accumulate  makes  a  permanent 
record.  This  may  be  sorted  or  analyzed  and  added  in 
accordance  with  any  predetermined  scheme,  or  at  any 
time,  to  obtain  special  information  as  the  exigencies 
of  the  business  may  require.  The  whole  system  hinges 
on  the  card;  but  the  punched  card  with  the  sorter  and 
adding  device  forms  a  complete  statistical  or  analytical 
unit  from  which  immense  advantages  may  be  obtained. 

Numerical  codes  must  be  used  to  represent  certain 
data.  The  data  on  the  card  must  be  all  which  might 
conceivably  be  of  use  in  any  analysis  of  this  sort,  pro- 
viding for  both  current  requirements  and  possible 
additional  special  reports  as  called  for. 

In  the  application  of  the  code  or  order  numbers  of 
the  accounts  to  be  recorded  by  these  cards,  it  is  not 
simply  a  question  of  the  notation  of  numbers'  and  figures 
on  the  card,  but  of  the  indication  of  these  symbols  by 
means  of  holes  or  perforations  at  measured  distances 
from  the  top  and  bottom  and  the  ends  of  the  card. 
This  could,  of  course,  be  done  on  blank  cards.  As  a 
matter  of  greater  facility  in  the  reading  of  the  codes, 
however,  the  card  is  printed  on  one  side  to  assist  in 
determining  the  location  of  the  code  signals  and  thus 


Material  255 

at  any  time  permits  checking  the  card  against  the 
original  data„ 

Technically  considered,  a  horizontal  line  of  nmnbers 
on  the  card  is  a  ''row"  and  a  vertical  line  of  numbers 
is  a  ''colmnn."  Where  these  columns  are  separated 
by  solid  vertical  lines,  ''fields"  are  formed,  each  field 
being  comprised  between  two  such  lines.  These  fields 
are  of  two  classes;  (1)  the  topical  field,  for  records  of 
standing  data,  such  as  dates,  departments,  etc.,  and 
(2)  the  statistical  or  adding  field,  for  amounts  which 
are  later  to  be  summarized  or  added.  The  operation 
thus  consists  in  the  sorting  or  the  grouping  of  the 
cards  according  to  the  topical  fields  and  in  the  aggre- 
gating or  the  adding  of  the  amounts  in  the  statistical 
fields. 

While  the  number  of  columns  is  variable,  the  number 
of  rows,  as  well  as  the  height  of  the  card,  is  constant. 
Those  fields  in  which  additions  are  made  utilize  ten 
rows,  because  of  the  limitations  in  the  decimal  numerical 
system,  ten  digits  being  required  to  produce  one  of  the 
next  higher  order.  For  dates  (12  months  in  the  year, 
etc.),  and  also  for  certain  specific  symbols  or  codes 
connected  with  each  individual  business,  two  additional 
rows  are  available  in  the  topical  fields. 

The  original  data  coming  to  the  recording  depart- 
ment in  various  forms,  are  recorded  on  the  cards  by 
means  of  a  punch  operated  by  keys.  The  rate  of  punch- 
ing varies  materially  with  the  amount  of  information 
carried  on  the  different  cards.  It  is  more  rapid  than 
ordinary  card  writing  or  the  usual  speed  of  joumalizers 
or  entry  clerks  in  bookkeeping.  Depending  upon  the 
number  of  holes  punched,  cards  are  handled  by  seasoned 
operators  at  the  rate  of  1,500  to  4,000  per  day.     The 


256 


Factory  Accounting 


average  output  might  be  stated  to  be  not  far  from 
2,500. 

In  nearly  all  cases  mechanical  sorting  is  necessary 
before  the  cards  can  be  used  to  obtain  the  analysis 
required.  The  *' sorting  machine"  is  used  for  the 
arrangement  and  the  rearrangement  of  the  cards  into 
orderly  groups,  such  as  by  material  classifications,  order 
numbers,  etc.  This  effects  the  sorting  or  classification 
of  records   with  almost  incredible   rapidity   and  with 


'Day 


2  Z 

33 

YK 
16 


3^ 


111--% 


NAMg^:eWgAiii<m/ 


^ 


fSo^ 


^A 


2«2 
•  33 


c,3>i 


•£ro 


CLA.PSEOTiM\E 


<f/> 


R^TE  Jit  M«<T.»  2^0^^ 


Order 

X 


4  4-4- 

5  5  5 

6  66 


777 
8  6  6 


I    I   I    I   I 

32222 
3  3  3  3 


+  44  ■*♦ 

6  SOS  6 
66  6  66 


7«777 
6  8  8  68 
9  3  3  3  3 


•  • 


X 

0  0  0 


I  I  I 

222 
3«3 


144  4 
55  5 
•6  6 


77  7 
99  9 


Pitces 

X 
0o« 

I T  I 

2  2  2 

3  3  3 

4  44 
505 

6  6  6 

7  7*7 

a  e  8 

3  3  3 


Time 


o  0!0 

2  2:2 

3  3;3 
44  ii 
5  5\h 

'77:7 

9  9l3 


L»bor 


o  o;o  0 
"liT  I 

2^2  2 
•  3;  3  3 

5  5:5  5 
e  6^6  6 


7  l\m  7 

8  a!  8  8 

9  5l3  3 


Ovwhe&d 


o  o;0  0 

3  3;0  3 

5  S;S  S 

6  &6  6 

asiaa 

9  9:3  3 


3 

m 
I 
o 

NP 
2  r 
> 

'    0 

01 


Fig.  69. — Labor  Card  Punched  from  Separate  Time  Kecords 


practical  certainty  of  accuracy.  Once  this  sorting  has 
been  made,  the  cards  are  run  through  the  adding  device, 
and  such  totals  as  may  be  necessary  are  obtained* 
If  then  any  further  sorting  is  required,  the  same  set 
of  cards  which  has  been  run  through  the  adding  device 
(in  as  many  sections  as  the  previous  ''sorts"  made 
necessary)  is  again  put  into  the  sorting  machine  and 
resorted  in  accordance  with  some  other  scheme,  and 
again  run  through  the  adding  device  to  obtain  the 
analysis  on  that  basis. 


Material  257 

Purchase   Caeds,  Automatic 

FlgTire   35   represents   a   form   of   automatic   sorting 

card  for  recording  data  concerning  purchases.     It  is 

punched  in  accordance  with  the  sixth  line  on  Figure  17. 

This  card  is  intended  to  show  information  as  follows: 

Topical  Fields: 

Date.  Day,  month,  and  year.  In  this  case  it  is 
used  with  reference  to  the  date  of  payment;  it 
may  be  used  for  invoice  date  if  desired,  provided 
each  invoice  is  represented  by  one  or  more  cards. 

Order  Number  under  which  the  goods  were  pur- 
chased; this  field  may  be  used  for  voucher  number 
under  which  the  goods  are  paid  for. 

Account,  having  reference  to  the  account  number 
symbols  such  as  shown  on  the  chart.  Figure  9, 
''foundry  material"  (70);  ''raw  castings"  (80); 
"manufacturing  expense"  (100);  "machinery" 
(404),  etc.  In  this  case  it  is  "factory  material" 
(74). 

Symbol,  representing  the  classification  to  which  the 
charge  is  properly  distributed;  usually  a  suB- 
classification  under  the  account  number.  If  there 
are  several  items  on  one  invoice  and  each  item 
is  chargeable  to  a  separate  account  or  classifica- 
tion, there  will  be  a  separate  card  made  for  each. 
In  Figure  17  the  three  invoices  shown  as  being 
paid  for  by  check  No.  8493,  namely,  1/18,  1/29, 
and  2/3,  are  presumed  to  be  all  chargeable  to 
account  74  (Factory  Material),  the  same  as 
that  invoice  (2/3)  which  appears  on  line  2  of 
Figure  19. 

17 


258  Factory  Accounting 

Cards,  meaning  the  number  of  cards  involved  under 
a  given  check  number.  In  this  case  there  is  but 
one;  if  each  of  the  three  invoices  involved  had 
one  or  more  cards,  the  punch  would  be  made  to 
indicate  the  exact  number. 

Bank,  meaning  the  number  of  the  bank  on  which 
the  check  is  drawn.  In  this  case  it  is  Bank  No.  2, 
as  shown  in  Figure  17. 

Chech  number,  meaning  the  serial  number  of  the 
bank  check.  In  case  there  is  more  than  one 
card,  this  number  being  purely  topical  is  shown 
on  all  the  cards  involved;  where  more  than  one 
card  is  involved,  the  check  amount  and  the  dis- 
count is  shown  on  only  one  of  the  group. 

Statistical  Fields: 

Check  amount,  being  the  net  amount  of  the  bank 
check  and  constituting  the  main  credit  item  on 
the  card  or  group  of  cards.  Where  there  are 
two  or  more  cards  under  the  same  voucher  num- 
ber or  check  number,  this  amount  is  shown  on 
only  one  of  the  group  in  order  that  the  same 
credit  be  not  considered  twice. 

Purchase  amount  debit,  this  being  the  gross  amount 
of  the  purchase  and  constituting  the  only  debit 
amount  on  the  card;  where  a  number  of  cards 
are  involved  under  one  check,  this  amount  corre- 
sponds with  the  individual  item,  or  items,  under 
any  one  symbol. 

Discount  credit,  being  the  cash  discount,  if  any, 
involved  in  the  transaction ;  this  should  not  appear 
on  more  than  one  card  on  any  one  check  number. 


Material  259 

Various  credit,  being  space  for  recording  any 
extraordinary  transactions,  as  for  example  the 
twelfth   and   sixteenth  lines   in   Figure   17. 

This  card  may  be  used  in  connection  with  the  bank 
accounts  and  the  Check  Register  Sheet  (Figure  17), 
and  also  in  connection  mth  the  Purchase  Analysis 
(Figure  19)  in  automatically  analyzing  the  various 
stores  accounts  for  posting  amounts  on  the  Stock 
Ledger  card  (Figure  32)  and  automatically  analyzing 
expense  items  instead  of  the  handwork  exhibited  on 
Expense  Analysis  Sheet   (Figure  83). 

Finished   Order   Cards,   Automatic 

Figure  36  represents  a  form  of  automatic  sorting 
card  for  recording  cost  data  concerning  finished  parts 
and  finished  product.  This  card  is  punched  in  accord- 
ance with  Order  No.  7503  on  Figure  20.  The  order  is 
entered  April  11  and  presumably  is  finished  April  22. 
This  card  shows  information  as  follows: 

Topical  Fields: 

Daie.  In  this  case  it  shows  the  hypothetical  date 
of  completion  of  the  work  on  the  order. 

Order  number,  meaning  the  production  order 
number. 

Account,  having  reference  to  symbol  numbers 
shown  on  Figure  9.  In  this  case  it  is  ''finished 
product"    (84). 

Symbol,  representing  a  subclassification  under  the 
account  number.  In  this  case  the  hypothetical 
mmiber  is  104  (not  elsewhere  shown). 


260  Factory  Accounting 

Statistical  Fields: 

Quantity,  meaning  the  count  of  items  actually 
finished. 

Material,  meaning  the  total  money  cost  of  charges 
against  the  order  number  for  raw  material  and 
finished  parts  entering  into  the  work. 

Labor,  meaning  the  total  money  cost  of  charges 
against  the  order  number  for  all  items  of  direct 
labor  entering  into  the  work. 

Time,  meaning  the  total  number  of  hours  and  deci- 
mals of  hours  consumed  by  direct  labor  applied 
to  the  work. 

Expense,  meaning  the  total  money  value  of  expense 
overhead  diffused  over  or  applied  to  this  indi- 
vidual order  number,  presumably  based  upon  the 
number  of  hours  consumed  in  the  work. 


^O^  T/CK£T 


Ma/jf^o. 


Na/TJc 


Date 


ShopOraerZ/o. 


JoJpA'o. 


Mac/i.  Ab. 


Operation 


Na/rje  of  Piece 


A/o.  Fts  fo  Joi> 


Pc5.  Finished  f hi 5  Ticket 


Pejecfed 


TIME 


MAURAT£ 


tVAQCS 


BU/^DCN 


TOTAL 


OAf 


■orr 


B£GUf/        COA/r/AiaCD      R£SUM£D 


(JAIFm.5M£D   lin£RRUPr£D  OPCRATIO// FIM .     JOB  FIN. 


REMARKS. 


Fig.  70.— Job  Ticket  for  One  Day.     Time  Written 


Material  261 

This  form  of  card  can  be  used  to  arrive  automatically 
at  the  various  segregations  incident  to  the  finished  order 
portion  of  Figure  20,  thus  doing  away  with  much 
''handwork"  and  still  retaining  the  ''proof  by  balance" 
feature.  ^\Tiere  these  cards  are  employed,  the  segre- 
gation of  charges  to  Finished  Product,  Special  Equip- 
ment, etc.,  is  quickly  and  automatically  obtained  for 
control  purposes   and  general   accounting  needs. 

Material  Issuance  Cards,  Automatic 

Figurfe  37  represents  a  form  of  automatic  sorting  card 
for  recording  data  concerning  issuances  of  material 
and  finished  parts  (semifinished  product)  from  Stores 
and  Stocks  to  Goods  in  Process  or  to  any  other  use 
which  such  issuances  may  be  put.  This  card  is  what 
is  called  a  "dual  card"  in  that  it  has  both  written  and 
punched  information  upon  it.  It  is  filled  out  with 
data  in  connection  with  Order  No.  6432,  as  shown  on 
Figure  20.  The  punched  information  to  be  shown  on 
this  form  of  cards  is  as  follows: 

Topical  Fields: 

Date.  Day,  month,  and  year  in  which  the  goods 
were  drawn  from  stores  or  stocks. 

Order  Nwnber.  The  production  order  number  when 
it  goes  into  goods  in  process;  or  the  consecutive 
order  number,  where  such  a  series  is  maintained 
for  expense  orders  for  work  other  than  direct 
production. 

Account,  having  reference  to  the  account  number 
symbols  such  as  shown  on  the  chart.  Figure  9, 
"material  (and  parts)  in  process  in  department 


262  Factory  Accounting/ 

2"  (320),  ''reserve  for  maintenance  of  buildings" 
(562),  symbol  (50)  (as  shown  in  the  100  group), 
etc. 

Symbol,  representing  the  classification  to  which  the 
charge  is  properly  distributed  (as  in  the  preced- 
ing paragraph  concerning  maintenance  of  build- 
ings classification). 

Department,  indicating  the  number  of  the  depart- 
ment to  which  the  goods  were  delivered. 

Unit,  showing  the  character  or  basis  of  the  count, 
weight,  or  measure.  In  this  case  the  numbers  are 
^  used  entirely  in  a  code  sense  and  only  the  digit 

having  a  numerical  value  is  considered,  the  other 
perforation  being  either  on  the  0  ''row"  or  on 
the  X  "row,"  which  in  this  case  is  used  merely 
as  is  a  space  bar  on  a  typewriter — to  send  the 
card  along  one  space.  The  letters  appearing 
above  the  numbers  have  meanings  as  follows: 
Pc,  piece;  Dz.,  dozen;  Gr.,  gross;  Oz.,  ounce; 
Lb.,  pound;  T.,  ton;  Lf.,  lineal  feet;  Sf.,  surface 
feet;  Cf.,  cubic  feet;  Bu.,  bushel;  Pr.,  pair; 
Qt.,  quart;  Pk.,  peck;  Cd.,  cord. 

Credits,  having  reference  to  the  account  number  of 
the  classification  from  which  the  goods  were 
drawn  and  the  symbol  number  representing  the 
subclassification,  which  may  mean  a  storeroom 
number,  a  section  and  shelf  number,  a  general 
material  classification  number,  or  whatever  may 
be  desired  under  the  system  in  use. 

The  last  column  has  sorting  significance  as  follows : 

3  Fd.— Foundry  Material 

4  Wd.— Wood  Shop  Material 


/ 


Material  263 

5  Fm. — Factory  Material 

6  Su. — Supplies 

7  Cg. — Castings 

8  Pt.— Parts 

9  Pr.— Product 

Statistical  Fields: 

Quantity,  meaning  the  count,  weight,  or  measure  of 

the  goods  involved. 
Value,  indicating  the  amount  of  money  involved. 

When  these  cards  are  employed,  they  usually  follow 
such  a  routine  of  handling  as  is  described  on  pages  173 
and  175.  In  addition  they  are  used  for  assortment 
under  the  "stores  and  stocks"  group  of  accounts,  the 
same  value  being  involved  in  the  debit  as  in  the  credit. 
In  effect  Figure  37  is  a  journal  entry  as  follows: 

Material  in  Process,  Dept.  2 $28.19 

Raw  Casting  Stocks $28.19 

Beyond  this  it  shows  the  exact  order  number  on  which 
the  material  was  used  and  the  classification  of  charges 
under  the  order  number  (the  order  number  being  hypo- 
thetical as  here  used),  also  the  storeroom  number  or 
general  group  of  material  to  receive  credit  on  the  Stock 
Ledger  (Figure  32). 

Materlul,  Issuance  Cards 

Storeroom  requisitions  for  material,  or  *' stores 
orders ' '  as  they  are  termed,  are  found  in  many  different 
forms,  due  to  the  fact  that  products  and  requirements 
in  the  different  lines  vary  so  widely.  Thus  in  one 
line    several   months    may   perhaps    intervene    between 


264 


Factory  Accounting 


the  time  the  factory  order  issues  for  the  building  of  a 
given  number  of  units  and  the  time  the  first  unit  of  a 
lot  is  finished.  In  other  lines  of  production,  orders 
for  component  parts  or  elements  to  be  made  up  for 
stock  are  issued  as  may  be  necessary  to  maintain  the 


JOB  NO 

CURNT     ELECTRIC  MFG.  CO. 
TIME  SLIP        Motor  Assembling  Dep't. 

PUT  ONLYONE  JOB  ON  THIS  SLIP  -  TURN  IN  DAILY 

DATE 

NAME 

NO. 

DAY  WORK 

mark  x  in  this  5race 
day'jobisstarteoonuy 

TYPE  &  SIZE  OF  APPARATUS  DRAWING  NO.  OF  PART 

A 
M 

A 
M 

1? 

30 

45 

7 

e 

9 

10 

NUMBER  FINISHED 

NAME  OF  PART 

11 

1 

? 

3 

OPERATION 

4 

5 

6 

7 

8 

9 

10 

11 

12 

1 

T  H    ON  JOB 

HR5. 

2 

3 

4 

5 

<5 

Fig.  71. — Job  Ticket  for  One  Day.     Time  Indicated  in  Quarter  Hours 


proper  visible  supply.  Or,  again,  when  the  component 
parts  or  elements  of  a  machine  are  in  stock,  an  order 
for  a  given  number  of  completed  units  is  practically 
nothing  more  than  an  assembling  order. 

It  not  infrequently  happens  that  a  production  order 
is  issued  for  a  given  number  of  finished  units  to  be 
made  up  from  start  to  finish,  save  for  certain  inter- 
changeable parts  which  are  usually  made  up  for  stock 
on    separate   production    orders    and    requisitioned    as 


Material  3C5 

needed.  It  sometimes  happens  that  the  stock  of  thest 
parts  is  exhausted  at  the  time  the  unit  orders  are  to 
be  put  through.  In  such  cases  two  courses  may  be  pur- 
sued. Just  enough  of  the  parts  may  be  made  up  for 
the  immediate  unit  order,  in  which  case  they  are  either 
made  on  a  separate  order  number  or  are  included  in 
the  unit  order  number,  and  the  surplus  is  then  trans- 
ferred to  stores  or  to  another  order  number. 

The  charges  for  raw  material  furnished  for  produc- 
tion orders  covering  semifinished  product  are  handled 
in  the  same  manner  as  similar  charges  to  production 
orders  which  cover  completed  product. 

Figure  38  shows  the  face  and  the  reverse  of  a  mate- 
rial card  form,  which  is  intended  to  be  hand  assorted 
to  individual  production  order  numbers  after  the  manner 
described  on  pages  168,  169,  and  170.  These  cards  are 
usually  issued  in  connection  with  a  detailed  specification 
or  bill  of  material,  and  when,  through  spoilage  or  other- 
wise, excess  material  is  needed,  it  is  drawn  on  a  card 
such  as  is  shown  in  Figure  39,  excess  material  card. 
It  may  be  noticed  on  the  reverse  portion  of  this  form 
that  space  is  provided  (under  quantity)  for  drawing 
more  than  probable  needs,  with  provision  for  showing 
amount  returned  and  the  extension  of  the  net  amount 
used. 

Figure  40  is  the  same  as  Figure  38  in  effect,  save  that 
it  is  a  requisition  for  finished  parts  instead  of  for  raw 
material.  The  method  of  handling  these  two  forms  is 
identical  in  each  case;  the  colors  of  the  cards  usually 
are  different  to  facilitate  ready  handling  and  sorting 
under  ''stocks  and  stores"  classifications. 

A  convenient  form  for  issuance  of  material  in  con- 


266  Factory  Accounting 

nection  witli  a  given  order  number  may  be  devised  in 
the  shape  of  a  large-sized  tag  numbered  and  perforated 
to  permit  the  easy  separation  of  its  coupons.  When 
more  or  less  rough  handling  is  given  the  tag  through 
the  factory,  only  the  material  coupon  is  perforated,  while 
the  labor  coupons,  where  they  exist,  are  clipped  off  with 
a  shears.  Figure  41  shows  such  a  form;  the  upper 
portion  has  space  for  data  concerning  the  order,  and 
coupons  are  appended  for  each  of  the  succeeding  labor 
operations  involved,  at  the  bottom  appearing  the  mate- 
rial requisition  or  order.  Where  this  plan  is  employed, 
order  tags-  are  prepared  in  different  length  or  numbers 
of  coupons,  so  that  a  choice  may  be  made  to  fit  the 
number  of  operations  involved. 

Figure  42  represents  an  order  for  the  making  of 
machine  knives.  In  this  case  the  workman  has  a  stock 
convenient  to  this  work,  and  he  makes  report  of  just 
what  he  uses,  presumably  working  the  stock  to  advan- 
tage. A  record  is  kept  of  the  scrapi  he  makes  on  each 
job,  which,  compiled  monthly,  registers  his  efficiency  in 
the  use  of  his  material*. 

Figure  43  is  a  form  ^hat  may  be  used  by  a  subsidiary 
shop  or  plant  in  making  daily  reports  to  the  main  office 
for  material  and  supplies  drawn  from  stores. 

Figure  44  is  what  is  known  ae-  a  ''bill  of  material,** 
covering  all  goods  that  go  into  a  given  order  number 
for  standard  product.  Where  this  is  used,  one  charge 
is  made  to  the  order  number  under  Goods  in  Process  and 
one  credit  is  passed  to  Stores  and  Stocks.  In  this  case 
it  is  usual  to  issue  the  material  in  boxes  or  '' tote-pans" 
all  at  one  time;  if  certairf  goods  are  ''out,"  the  item 
or  items  are  "back-ordered"  and  the  bill  of  material 
is  held  by  the  storekeeper  until  the  items  are  supplied. 


Material  267 

Various  Material  Forms 

Figure  45  is  a  receiving  sheet  kept  by  the  storekeeper, 
upon  which  he  indicaties  finished  parts  coming  into  his 
possession  from  goods  in  process.  This  is  important 
in  registering  a  count  of  such  parts  as  are  finished,  and 
also  it  gives  the  signal  to  the  cost  department  that  the 
good  have  passed  out  of  the  process  state.  Where  this 
form  is  used,  it  is  usual  to  **post"  the  items  to  the 
Production  Register  (Figure  20)  under  the  heading  of 
' '  Inventories,  Finished. ' ' 

Figure  46  represents  a  form  for  the  dual  purpose  of 
analyzing  or  classifying  the  various  requisitions  or  cou- 
pons upon  which  the  storekeeper  issues  material  or  parts 
and  of  furnishing  him  with  a  receipt  for  such  requisi- 
tions. A  carbon  copy  is  kept  of  the  form,  and  in  the 
upper  part  of  it  he  gets  someone 's  receipt  for  such  requi- 
sitions as  he  turns  over.  This  feature  is  important  to 
the  storekeeper,  as  when  the  requisition  (cards,  tags,  or 
whatever  be  the  form)  leaves  his  possession,  his  only 
evidence  of  the  transaction  is  his  carbon  copy  of  the 
analysis  or  summary  sheet. 

Figure  47  represents'  a  sheet  for  use  on  an  ''unlimited 
split"  adding  machine  according  to  the  names  described 
on  pages  168  and  169.  This  purports  to  be  sheet  16 
as  listed  on  General  Exhibit,  folio  2  (Figure  12), 
line  28.  An  error  in  allocating  inadvertently  occurred 
in  entering  this  on  the  Exhibit;  this  in  actual"  practice 
would  be  corrected  in  a  following  Exhibit  folio,  by 
merely  transferring  the  amount  from  one  group  to 
another.  The  reader  may  find  the  error  for  himself  by 
reference  to   Figures   9   and   12. 

By  reference  to  Figure  47  the  following  totals  may 


268  Factory  Accounting 

be  seen,  which  summarized  for  entry  in  the   General 
Exhibit  appear  as  follows: 

Material  in  Process $42,094.71 

Manufacturing  Expense. 962.14 

Foundry  Material $  6,918.12 

Woodworking    Material 3,328.75 

Factory  Material 9,413.28 

Supplies     962.14 

Raw  Casting 8,642.32 

Finished  Parts 13,792.24 


$43,056.85     $43,056.85 


THE  SWEETZ    BAKERY 

Cake  Dept 
DAILY  TIME  SHEET 


Na 

KTxa 

91 

UNITS 

TIME 

NAME  OF  GOODS 

KIND  or 
WORK 

0 

1 

6:00 

:o6 

2 

:I2 

3 

:I8 

4 

:a4 

b 

:30 

e 

t36 

7 

■.-42 

8 

:48 

y 

-.SAr 

10 

TOO 

L...,.^ 

_^ 

:06 

"         — 

' 1 

p- ■ 

112 

:I2 

lib 

-.18 

U4 

-.24 

115 

:30 

life 

:36 

117 

•A2 

118 

:A8 

119 

-.54. 

IZO 

6:00 

1    Mixing 

S  Trimming 

2    Layingout 

e>   Setting  together 

^   Baking 

7    tcin^ 

4-  Packing 

a    Cutting 

■3     Wrapping 

Fig.  72. — Daily  Time  Report.     Time  Indicated  by  Time  Unit  Numbers 

(Six  Minutes) 


Material  269 

By  using  the  double  adding  feature  of  the  adding 
machine  the  items  can  be  listed  in  one  of  the  ** counters," 
and  when  totaled,  the  total  can  be  ''transferred"  to 
the  other  "counter"  and  thus  can  be  had  both  the 
total  for  the  individual  departments  and  the  total  of 
totals. 

Figure  48  presents  a  method  for  checking  up  the 
physical  count  of  stocks  and  stores  with  the  Stock 
Ledger  cards  (Figure  32).  When  certain  items  or 
groups  of  items  are  low,  the  Stock  Ledger  clerk  fills  out 
one  of  these  forms,  showing  whatever  items  he  wants 
checked  up  by  actual  count,  measure,  or  weight.  This 
figure  represents  perhaps  the  entire  contents  of  a  nut 
storeroom  or  compartment,  referred  to  in  this  case  as 
the  "nut  shed."  The  figures  hereon  are  transferred  to 
Exhibit,  folio  2,  line  3  (Figure  12). 

Figure  49  is  a  large  form  for  use  when  entire  depart- 
ments of  stores  and  stocks  or  goods  in  process  are  to 
be  taken.  This  form  is  for  peimanent  record  and  is 
punched  for  a  sectional  post  binder.  A  divisional  sheet 
can  be  placed  between  each  department,  showing  on  its 
face  the  inventory  totals  and  the  totals  of  the  Stock 
Ledger  controlling  account  involved  or  of  the  depart- 
mental Goods  in  Process  Account,  as  the  case  may  be, 
also  data  concerning  entiy  date. 

Figure  50  presents  an  ordinary  form  for  inventorying 
equipment.  This  form  contemplates  using  the  name  and 
the  descriptive  data  for  a  number  of  years  by  having 
a  number  of  appraisement  columns. 

Figure  51  is  a  defective  work  report  to  be  used  when 
goods  in  process  are  spoiled.  From  this  report  the  cost 
department  secures  the  necessary  financial  data  for  its 
records  and  the  facts  required  to  relieve  the  individual 


270  Factory  Accounting 

shop  order  of  the  charges  for  lost  or  spoiled  material 
and  to  transfer  them  to  their  proper  destination  in  the 
Over,  Short,  and  Damage  Account.  The  bottom  portion, 
or  coupons,  of  the  loss  report  is  used  for  an  explanation 
of  the  physical  causes  that  led  to  the  loss.  This  coupon 
goes  to  the  superintendent,  placing  the  facts  before  him 
in  concrete  form.  It  can  be  filed  finally  under  the 
number  of  the  workman  through  whom  the  loss  was 
incurred  and  will  then  serve  as  a  part  of  his  efficiency 
record. 


CHAPTER  XVI 

liABOR 

Time  Registration 

There  is  nothing  so  fatal  to  the  discipline  of  a  plant 
nor  so  disastrous  to  its  smooth  and  profitable  working 
as  to  have  a  body  of  men  irregular  in  their  appearance, 
who  come  late  and  go  out  at  odd  times.  Efficiency  is, 
to  a  large  extent,  a  matter  of  faithfulness;  and  if  a 
factory  management  insists  upon  regular  and  prompt 
appearance,  it  is  paving  the  way  to  good  work.  There 
is  only  one  way  to  stop  irregularity — make  it  unprofit- 
able. If  the  management  weeds  out  the  nondependable 
individuals,  it  will  before  long  develop  a  good  working 
organization.  To  weed  out  these  undesirables,  there 
should  be  an  accurate  record  of  the  entering  and  the 
leaving  time  of  all  the  workers  in  the  concern  separate 
and  apart  from  any  cost  finding  records  that  may  be 
kept  on  individual  jobs. 

It  is  obvious  that  the  highest  efficiency  is  not  possible 
unless  failures  to  attain  this  standard  are  known.  Such 
failures  an  adequate  time  system  will  discover.  It 
primarily  indicates  costs,  but  even  in  this  it  affords 
an  index  to  efficiency,  for  an  increased  cost  is  an  almost 
unfailing  indication  of  failure  in  effort  or  operation. 

When  efficiency  failures  are  suspected  or  known  to 
exist,  the  time  records  will  show  just  what  and  where 
these  failures  are.    The  efficiency  failures  may  be  found 

271 


272  Factory  Accounting 

in  slow  or  careless  work  on  the  part  of  the  employees 
or  in  the  defective  operation  of  machines;  or  it  may 
be  due  to  accidental  interruption  to  the  usual  or  proper 
routine  of  production.  Whatever  the  cause,  it  will  be 
shown  by  the  time  records,  intelligently  applied. 

The  proper  use  of  a  time  system,  as  applied  to  Gost 
finding,  will  also  serve  to  equalize  the  output  in  the 
various  departments  and  tb  afford  a  basis  upon  which  to 
judge  the  comparative  efficiency  and  desirability  of 
workmen.  To  the  majority  of  these  employees  it  is  an 
unmixed  good,  giving  a  fair  and  just  estimate  of  their 
abilities  and  making  them  largely  independent  of  the 
whims  and  caprices  of  foremen.  What  they  do  is  a 
matter  of  recorded  fact,  not  ordinarily  open  to  attack, 
and  enables  the  establishment  of  a  merit  system,  equita- 
ble and  adequate,  as  it  is  based  on  actual  performance. 
A  moi*e  potent  factor  for  increased  efficiency  could  not 
be  devised. 

Time  Reports 

The  importance  of  accurate  time  reports  cannot  be 
emphasized  too  strongly,  for  without  them  accurate  cost 
finding  is  impossible.  If  less  time  is  reported  on  some 
particular  job  than  was  actually  consumed,  then  some 
other  job  has  to  bear  the  burden,  and  the  findings  of 
the  cost  system  are  false   and  misleading. 

The  time  reporting  system,  w^hatever  its  precise  form, 
should  show  the  total  hours  of  labor  expended  upon 
each  individual  order  number  or  process  and  also  the 
total  of  each  day's  labor.  The  number  of  hours  devoted 
to  each*  separate  order  number  is  a  prime  necessity  for 
the  distribution  of  manufacturing  expense  overhead. 
The  total  of  each  day's,  labor  (Figure  80)  is  necessary 


Labor  27^ 

for  entry  on  the  General  Exhibit  (Figure  12,  line  22), 
where  it  is  debited  to  the  proper  controlling  accounts — 
which  are  for  productive  time,  Goods  in  Process,  Labor 
and  for  nonproductive  time,  Accruing  Manufacturing 
Expense — and  credited  to  Accrued  Labor. 

Time  reports  vary  widely  in  form  and  in  method  of 
use.  Under  some  conditions  individual  job  cards  are 
used  to  report  the  time  expended  on  each  separate  order 
number.  In  this  case  the  time  of  the  employees  between 
'4n  an  out"  not  reported  on  their  cards,  represents  the 
time  lost  between  jobs.  Under  other  conditions  time 
cards  are  used  which  show  the  disposition  of  the 
employees'  time  for  the  entire  day,  idle  time  being 
shown  as  well  as  active  working  time. 

The  most  efficient  form  of  time  report  is  one  on  which 
both  the  beginning  and  the  finishing  time  are  recorded 
by  a  clock  or  time  stamp.  This  records  the  facts  and 
precludes  the  falsification  and  evasion  possible  under 
almost  any  t)ther  conditions.  Practically  every  employer 
of  labor  should  have  a  time  recorder  for  exactly  the 
same  reason  that  every  merchant  has  a  scale.  If  he 
be  a  small  merchant,  he  needs  the  scale  equally  as  much. 
The  large  merchant  merely  uses  more  of  the  same  kind, 
just  as  with  time  recorders. 

"Where  the  time  register  is  not  in  use,  time  reports 
must  be  made  out  by  hand.  There  are  many  forms  of 
time  reports  adapted  for  this  use,  ranging  widely  in 
scope  and  character.  Some  of  these  are  reproduced  in 
Figures  63  to  74.  Those  shown  are  all  good  forms  for 
time  recording,  and  any  one  of  them  may  be  used  to 
advantage  under  the  conditions  for  which  it  is  adapted. 
The  choice  will  depend  entirely  upon  the  requirements  of 
the  cost  system  in  use,  as   the  time  record  must,   of 

18 


274  Factory  Accounting 

course,    ''dovetail"    with    the    general    plan    of    cost 
accounting. 

In  some  shops  a  timekeeper  constantly  circulates 
among  the  employees  and  records  each  change  of  job. 
Where  this  system  is  in  use,  the  report  fonn  shown  in 
Figure  75  may  be  used  to  advantage.  In  other  shops 
the  foreman  is  directly  responsible  for  a  proper  record 
of  time  and  makes  the  time  reports  himself  as  the 
employees  report  to  him — a  modification  of  the  time- 
keeper plan.  Neither  the  perambulating  timekeeper 
nor  the  recording  foreman  plan  is  to  be  recommended. 
In  nine  cases  out  of  ten  it  will  be  found  that  the 
employees  make  a  pencil  memorandum  of  the  ''time" 
to  be  reported,  and  if  such  a  record  is  to  be  made,  it 
would  better  be  made  on  the  final  time  report  than 
entered  as  sC  merely  preliminary  memorandum. 

It  may  also  be  said  generally  that  it  is  not  advisable 
to  make  bookkeepers  o»t  of  shop  hands.  This  is  espe- 
cially true  where  the  class  of  help  employed  is  illiterate. 
In  such  a  case  any  record  to  be  made  by  the  men  should 
be  made  through  the  medium  of  some  modern  and 
effective  time  recorder.  Then  the  act  required  of  the 
shop  hands  is  merely  automatic,  and  the  time  is  recorded 
accurately  and  easily. 

Using  Time  Repokts 

"Filling  in"  is-,  of  course,  necessary  to  any  form 
of  time  card.  In  some  factories  the  foreman  or  a 
clerk  makes  out  the  body  of  the  time  card,  leaving  the 
starting  and  the  stopping  tin;e  to  be  filled  in  by  the 
workman.  This  latter  is  probably  the  best  method  under 
ordinary  conditions,  especially  where  time  recorders  are 
used,  as  the  employees  are  not  then  called  upon  to  use 


Labor  275 

any  brain  capacity  whatever  in  the  handling  of  their 
time  cards.  The  time  recorders  do  this  for  them.  When 
enough  registers  are  supplied  so  that  the  men  need  go 
but  a  short  distance  to  reach  them,  less  time  is  required 
to  make  this  accurate  and  desirable  form  of  record  than 
is  required  by  the  average  shop  hand  to  write  laboriously 
a  more  or  less  inaccurate  record  on  the  card. 

Where  a  machine  is  under  construction,  it  is  advisable 
in  almost  every  case  to  work  out  costs  on  individual 
parts  rather  than  to  take  the  machine  as  a  whole.  In 
fact,  the  cost  in  its  truer  sense  is  not  known  unless  the 
costs  on  individual  parts  are  kno^vIL  Where  costs 
are  worked  on  individual*  parts,  the  various  parts  being 
made  contemporaneously,  the  shop  order  can  apply  to 
the  entire  machine  or  other  article,  while  the  various 
parts  can  be  made  under  separate  or  subshop  orders, 
the  common  order  number  being  used  in  connection  there- 
with. This  plan  insures  the  proper  segregation  of  the 
time  reports  under  the  common  shop  order  number,  both' 
for  the  parts  and  for  the  machine  or  other  articles  as  a^ 
whole,  and  yet  the  details  of  work  on  the  parts  are 
presented  in  such  manner  that  the  information  may  be 
effectively  classified. 

Time  cards  for  use  with  time  recorders  are  shown  in 
Figures  52  to  64  and  possibly  65  and  QQ.  A  common 
form  of  time  card  where  time  recorders  are  not  used, 
has  a  list  of  different  operations  printed  on  its  back, 
the  employee  indicating  the  work  he  has  done  by  a 
check  mark  against  the  proper  operation,  thereby  saving 
the  necessity  of  writing  it  out  in  full.  Included  in  the 
printed  details  of  this  time  card  are  clock  dial  imprints, 
and  on  these  the  workman  checks  his  starting  time  and 
his  stopping  time.  The  dial  feature  usually  consTimes 
more   of  the   workman's   time   than   does   the   writing 


276  Factory  Accounting 

of  the  time  in  plain  figures  or  the  checking  of  the  time 
in  plain  figures  as  shown  on  Figures  71,  72,  or  73. 

A  fairly  good  card  for  use  where  time  recorders  are 
not  employed  is  shown  in  Figure  70.  Here  the  time 
space  for  *  *  on "  is  subdivided  so  as  to  cover  the  different 
possibilities.  Under  the  subhead  ''Begun"  is  entered 
the  beginning  time;  under  ''Continued,"  the  time  work 
is  begun  on  the  succeeding  day  when  no  other  work 
has  intervened;  and  under  "Resumed,"  the  beginning 
time  when  other  work  has  intervened. 

Time  "Off"  is  similarly  subdivided.  On  the  card  as 
showTi,  under  "Unfinished"  is  entered  the  stopping  time 
when  work  is  not  finished  at  the  end  of  the  day;  under 
"Interrupted,"  the  time  when  employee  is  diverted  to 
another  job;  under  "Operation  Finished,"  the  time  when 
the  work  under  that  ticket  is  finished;  and  under  "Job 
Finished,"  the  time  when  the  job  is  complete  with  no 
more  tickets  to  follow. 

This  same  form  of  card  may  be  used  with  a  time 
recorder  if  made  sufficiently  large  to  provide  stamping 
spaces  under  or  against  the  different  headings.  Or, 
again,  it  may  be  adapted  for  such  use  more  simply  by 
providing  a  stamping  space  under  both  the  heading 
"On"  and  the  heading  "Off,"  the  particular  subhead 
referred  to  being  checked  with  pencil  or  indicated  in 
some  similar  way. 

NoNPEODTJCTrVE  AND  DeAD  TiME 

In  nonproductive  work  there  should  be  standing  shop 
orders  for  the  different  classes  of  work;  as  for 
instance,  "Repairing  Machinery,"  "Cleaning  Machin- 
ery," "Trucking,"  "Storeroom  Labor,"  "Sweeping  and 
Cleaning  Shop,"  etc.     For  such  labor  the  time  report 


Labor 


277 


is  practically  the  same  as  for  prodnctive  labor,  except 
that  a  designating  color  is  usually  employed  as  a  matter 
of  convenience.  Also  a  color  scheme  for  nonproductive 
time  cards  may  be  used  to  advantage  as  between  dif- 


TIME  AND  J08  RECORD 

^  I               The  Liquid   Hydraulic  Machinery  Co. 

Ne.tfPiccei               Casti/ifA/o- 

A&/7W  oTAr^jc/e                          Oraer/^ 

^c    ^lU^i             Cbju 

N^^^^*-«>l^                     1^1-2.^ 

OiecAA/o.        Name  o/' £/Tip/eyee             MacJi  A/o 

^             Operatio/7 

GM     Q^M<^Hif<(ji^   Jlf4Cj 

7ruu.U^ 

P/cceiLojf              Mafenaf  v-^    Remarks 

r 

6        7        ?     •  ^        '"        " 

PATf             S:jO     f-M      7:30      830      >30     /OSO    //'JC 

12           1            2           5           4           5           6  TOTAL 
•>     /a  SO    /-JO      eSQ     3:30     4:50    S:30     HOVRi 

CZ<-<^  (f4-    ,            (/ 

>  ^      .  /                 J/,                        I'Jv- 

-y  in- 

CUk^  is- 

.^         .'■                                                       y"      v5^/A 

0 

(Xu^.  IC                  s^ 

>3'A- 

^ 

^'---'  /L'fi^ 

' 

' - 

V 

Fig.  73.— Job  Ticket  for  Week.     Time  Indicated 

ferent  departments.  *' Nonproductive"  time  reports  will 
not  be  used  ordinarily  by  producers  unless  they  are 
on  nonproductive  work  for  the  entire  day,  nonproductive 
time  less  than  a  day  being  reported  on  the  regular  pro- 
ductive form. 

Under  the  machine-hour  plan  of  cost  finding  a  separate 
card  is  ordinarily  employed  for  the  time  when  the 
machine  is  not  in  operation;  this  does  not  mean  the 
time  occupied  in  the  setting-up  process,  inasmuch  as  that 


278  Factory  Accounting 

time  should  ordinarily  be  charged  in  with  the  running 
time  on  the  job,  as  should  also  any  time  necessary  to 
put  the  machine  in  a  condition  of  readiness  to  set  up 
for  the  next  job. 

One  idle-time  card  will  ordinarily  suffice  for  the  inter- 
val of  an  entire  pay  period,  but  if  the  stops  are  too 
frequent,  two  or  more  cards  can  be  used  in  conjunction 
with  each  other  during  the  period.  It  is  not  essential 
that  the  operator  ring  '^off"  on  his  regular  card  every 
time  a  delay  occurs,  unless  it  so  happens  that  the  job 
is  completed.  He  should  always  ring  "on"  the  idle- time 
card,  however,  and  "off"  when  the  idleness  ceases — • 
the  cost  clerk  can  take  care  of  any  time  deductions 
that  are  to  be  made.  When  an  entire  department  is 
required  to  shut  down,  the  foreman  can  report  on  a 
single  idle-time  card  rather  than  require  each  employee 
to  register  on  the  clock.  In  arranging  the  printing 
on  the  idle-time  card,  "causes"  by  number  are  usually 
given  space  on  the  back  and  made  to  read  about  like 
the  following: 

1.  Waiting  for  stock,  or  mistakes  as  to  stock. 

2.  Waiting  for  tools  or  other  appurtenances  dependent 
upon  others  for  dehvery. 

3.  Waiting  for  specific  orders  or  instructions  (a  condition 
usually  resulting  from  insufficient  original  information  or  inabil- 
ity to  get  at  foreman,  etc.). 

4.  Absence  of  operator  or  assistant. 

5.  Lights  out. 

6.  Improper  temperature 

7.  Spoiled  work  in  this  or  other  departments  (the  delay 
occasioned  by  the  discovery  of  spoiled  work  comes  properly 
under  this  head,  but  not  the  time  consumed  on  the  rejected 
product,  as  provided  in  Figure  51). 


Labor 


279 


8.  Power  off   (where  practicable,  the  idle  time  should  be 
used  for  machine  cleaning) . 

9.  Supplies  or  equipment  exhausted. 

10.  Cleaning  machine. 

11,  Repairs  or  local  mechanical  difficulties  occasioning  poor 
action. 


THE  INTERIOR    CONSTRUCTION  COMPANY 

No 

Hours 

MAULED  FROM 

HAULED  TO 

COMMODITY 

RECEIVED    BY 

.     tk 

• 

Fig.  74.— Daily  Time  Report.    Time  Written 


Planning  Rack 


Figure  77  shows  the  design  of  a  rack  devised  for  the 
purpose  of  laying  out  work  for  machines  and  operatives ; 
it  is  also  known  as  a  ''jobs-ahead  rack"  and  is  arranged 
by  classes  of  machines,  each  class  being  indicated  by  a 
flag  mounted  on  a  square  staff.  These  staffs  are 
equipped  with  hooks  which  fit  snugly  over  the  cross- 
pieces  of  the  rack  without  further  fastening;  they  are 
readily  adjustable  to  any  position  on  the  rack. 


280  Factory  Accounting 

The  general  plan  of  operation  is  to  have  a  pocket 
(Figure  78)  numbered  for  each  employee  or  for  each 
machine  desired.  These  pockets  are  made  of  a  conven- 
ient size  to  fit  the  daily  time  card  in  use;  where  the 
time '  card  is  long,  for  instance  as  in  Figure  64,  the 
cards  may  be  folded.  The  name  and  the  employee 
number  on  the  time  card  should  show  just  above  the 
top  of  the  pocket.  The  rate  is  never  inserted  until  the 
daily  time  report  is  turned  into  the  cost  office,  as  work- 
men are  oftentimes  bright  enough  to  figure  out  ciphers 
and  codes  used  to  represent  pay  rates. 

The  production  orders,  preferably  like  Figure  41,  for 
specific  order  production,  should  be  kept  at  or  near  the 
planning  rack,  and  the  superintendent,  foreman,  or  other 
person  whose  duty  it  is  to  give  out  the  work  scans  the 
production  orders  at  least  once  each  day,  but  probably 
oftener,  looks  over  the  rack  and  assigns  work  enough 
in  advance  to  keep  all  operatives  busy  to  the  best 
advantage.  As  an  operation  is  completed,  the  coupon 
for  that  operation  is  clipped  from  the  production  order 
tag  and  sent  to  the  cost  department  at  the  end  of  the  day. 

The  card  pocket  (Figures  77  and  78)  has  a  num- 
bered *' sticker"  on  it,  indicating  the  man  number  or 
the  machine  number;  also  it  is  equipped  with  a  card- 
holder on  the  front.  On  the  card  contained  in  this  front 
holder  (Figure  79)  are  shown  the  order  numbers 
assigned  to  the  operative,  and  also  the  standard  or 
allotted  time  it  will-  take  to  complete  each  order.  As 
orders  are  completed,  they  are  crossed  off  by  a  pencil 
stroke,  thus  leaving  clear  what  work  is  ahead  of  each 
machine. 

The  card  pockets,  or  boxes,  are  adjustable  so  far  as 
concerns  the  location  upon  the  rack,  and  the  rack  can  be 


Labor 


S81 


i 

0 

J 
"5 
.1 

Vi 
o 

i 
t 

5 





■       1"- 

K 

2 

5 

i 

s 

!^ 

= 

o 

91 

(0 

N 

« 

n 

* 

ml 

ei 

il 

- 

p:. 

§    . 

I 

— 

!^ 

« 

>*- 

-* 

« 

rv 

£ 

3 

£ 

J 

x: 

K 

< 

5     dl 

JS 

, 

f 

1 

I 

PQ 


282 


Factory  Accounting 


"5 

r 

1 

i 

!•■ 

,J' 

.1. 

1^ 

2    «  8 

o 

0 

2     fif-'* 

i       JPOJ 

0   ■'Y'a 

c. 

£ 

UJ 

^— 

CQ 

— 1 

cr 

ss 

O- 
u_> 

TIT 

.      d»3a 

f>«OJA\ 

*     Ji.MJ 

h- 

• 

e 

Labor  283 

arranged  and  rearranged  if  desired,  to  suit  tlie  con- 
venience of  the  planner,  assigning  a  given  class  of  work 
an  entire  side  of  the  rack  or  possibly  not  more  than  two 
•tiers  or  banks — a  minimum  of  two  because  the  metal, 
indicating  flag  takes  up  or  spreads  over  the  space  of 
two  tiers. 

Figure  78  shows  a  detached  card  pocket,  and  Figure  79 
shows  the  two  cards  which  are  slipped  in  the  front 
portion  of  the  pocket.  The  upper  card  remains  perma- 
nently with  the  box  or  until  the  box  is  assigned  to 
another  employee  or  machine  number.  The  lower  card 
is  replaced  as  often  as  one  becomes  filled. 

In  the  operation  of  the  planning  rack  each  employee's 
work  is  planned  ahead  so  that  he  may  turn  directly 
from  one  job  number  to  the  next,  stamping  or  ringing 
''stop"  on  the  first  job  card,  or  coupon,  and  ringing 
"start"  at  once  on  the  next.  There  are  then  no  pauses 
or  lost  time  between  the  two  jobs — a  condition  desirable 
not  only  from  the  accounting  standpoint,  but  from  the 
standpoint  of  individual  efficiency.  If  this  is  not  the 
case,  there  is  idle  time  between  jobs,  which  is  a  direct 
loss  to  either  employer  or  employee,  depending  upon  the 
method  of  labor  payment,  the  employer  suffering  to  some 
extent  in  either  case. 

Mechanical  Aids 

The  daily  time  report  which  best  fits  in  with  the 
planning  rack  under  ordinary  conditions  is  shown  in 
Figure  64.  Either  the  coupons  can  be  used  on  a  time 
recording  device,  or  the  time  can  be  filled  in  by  hand, 
preferably  the  former;  they  are  not  detached  as  filled, 
but  the  strip  is  taken  up  at  the  close  of  each  day  by 
the   cost   department.      Subsequently   the   coupons    are 


284  Factory  Accounting 

extended  by  determining  the  elapsed  time,  deducting  any 
lost  time  shown  on  the  top  coupon  and  reducing  the  net 
time  to  a  money  value,  adding  all  elapsed  time  to  see 
that  the  total  compares  with  the  total  ''in"  and  **out'* 
time.  A  device  has  been  invented  for  this  pui'pose  which 
will  subtract  stopping  time  from  starting  time,  as  shown 
indiscriminately  on  any  form  of  time  report,  and  which 
will  determine  the  elapsed  time  and  multiply  it  auto- 
matically by  any  desired  rate  per  hour,  registering  on 
the  coupon  the  elapsed  time  and  its  money  value, 
together  with  a  prorated  apportionment  of  overhead, 
and  accumulating  the  several  values  of  all  such  coupons 
on  the  strip,  transferring  a  printed  total  of  hours  and 
money  values  (labor  and  overhead)  to  the  head  of  the 
strip  and  in  addition  to  this  list  each  calculation  on  a 
large  sheet  similar  to  that  described  on  pages  168  and 
169. 

The  coupons  of  the  time  report  sheet  are  detached 
from  the  time  report  strip  by  a  small  shear,  such  as  is 
used  to  trim  photographs,  or  a  pair  of  scissors  and  are 
filed  under  the  proper  number  as  mentioned  on  page  168. 
Finally  the  stub  containing  the  total  time  for  the  day  is 
filed  under  the  workman's  number  until  the  pay  roll  is 
to  be  made  up,  when  all  the  stubs  are  removed  and  sum- 
marized for  the  pay  roll  (Figure  81). 

Figure  68  shows  a  form  of  perforated  card  which  can 
be  used  to  advantage  with  the  planning  rack.  This  card 
is  for  use  in  connection  with  an  automatic  elapsed  time 
equipment,  consisting  of  two  separate  devices.  "VSTiat 
is  known  as  the  ''shop  machine"  is  a  special  form  of 
time  recorder  and  will  record  in  plain  figures  the  start- 
ing and  the  stopping  time  respectively  and  can  accumu- 
late covering  a  period  of  a  week.  In  the  card  shown, 
the  starting  and  the  stopping  happen  to  have  been  on 


Labor 


285 


the  same  day,  March  8,  as  shown  at  the  bottom  of  the 
time  registration  columns.  The  small  **2"  in  this  case 
indicates  the  department  number.  To  find  the  elapsed 
time  these  cards  must  subsequently  be  put  through  what 


:  ! 

:        j 

, L 

MILLER 

Oper  5g 


?-  T 


/■6f 


■^'r 


Fig.  77. — Planning  Eack 


is  termed  the  ''office  machine,"  which  finds  the  elapsed 
time  and  prints  it  in  plain  figures  (top  and  center  of 
card)  and  simultaneously  punches  the  elapsed  time  in 
the  ''Time"  column  (at  the  right  hand  of  card).  The 
data  on  this  card  are  in  connection  with  Order  No.  6432 
on  Figure  20;  where  these  cards  are  used,  only  one 
posting  of  each  element  is  necessary  on  the  Production 


286  Factory  Accounting 

Kegister  in  a  given  month,  as  the  cards  can  be  auto- 
matically totaled  and  the  total  posted. 

As  these  cards  are  limited  as  to  space,  the  columns  must 
be  made  to  tell  as  much  as  possible  in  as  little  space 
as  possible.  At  the  extreme  right  column  numbers  *'l" 
and  ''2"  indicate  productive  labor  (P)  and  nonpro- 
ductive labor  (NP),  respectively.  The  presence  of  these 
symbols  makes  as  few  as  two  columns  possible  in  the 
*' account"  field.  If  the  card  be  "productive,"  Figures 
31,  32,  33,  or  34  will  answer  to  indicate  respectively, 
Departments  1,  2,  3,  or  4  (Figure  9),  and  the  "over- 
head" and  "labor"  on  the  card  can  then  be  properly 
allocated.  If  the  card  be  "nonproductive,"  then  figures 
anywhere  between  10  to  26  will  be  recognized  to  mean 
under  the  100  group. 

The  six  perforations  at  the  left-hand  side  of  the  card 
(in  the  handwriting  portion)  have  no  accounting  signifi- 
cance, but  are  merely  for  the  "office  machine"  in  deter- 
mining the  elapsed  time.  This  equipment,  like  a  number 
of  other  clever,  elapsed-time  calculators,  requires  a  card 
especially  equipped  for  it  and  usually  obtainable  only 
from  one  source,  thus  narrowing  its  use  by  making  the 
system  fit  the  device  instead  of  the  device  fit  gracefully 
into  the  needs  of  the  system.  In  addition,  the  reduction 
of  the  elapsed  time  to  a  money  value  must  be  inde- 
pendently performed  as  well  as  that  of  the  overhead 
apportionment.  An  objectionable  feature  of  this  device 
if  it  is  intended  to  be  used  over  a  period  of  days  is 
that  it  faithfully  calculates  during  all  working  hours 
and,  therefore,  does  not  deduct  any  "in  lates"  and 
"out  earlies,"  in  which  case  it  appears  to  be  advisable 
to  close  each  card  each  day  instead  of  attempting  to 
run  one  card  an  entire  week.  Where  it  is  desired  to 
accumulate  time  data  on  one  card.  Figure  52  used  on 


Labor 


287 


an  ordinary  time  recorder  is  -mucli  better  and  can  handle 
'interruptions,"  "continuations,"  "resumptions,"  etc., 
without  confusion,  the  elapsed-time  calculations  being 
performed  on  the  first-mentioned  device  and  the  data 
so  found  being  punched  upon  a  labor  card  like  Figure  69 
if  an  automatic  sorting  card  be  desired.  Figure  69 
represents  Order  No.  7503  on  Figure  20  and  is  supposed 
to  embody  an  accumulation  of  time  from  a  form  similar 
perhaps  to  Figure  52. 

Beyond  the  automatic  feature  embodied  in  the  devices 
used  in  connection  with  Figures  35,  36,  37,  68,  and  69, 


\--''  0>:''        '  ^-"'0     •■:'•'     <■'       "■■'■,UII"JI' U     , 


Fig.  78,— Card  Pocket 


Fig,  79. — Indicator  Cards 


there  have  been  developed  several  distinct  types  of 
key-operated  assorting  machines  both  for  numerical  and 
alphabetical  assortments.  At  the  present  time  the 
former  (numerical)  are  used  most  largely  in  railroad 
accounting,  particularly  as  to  waybill  data,  and  the 
latter  (alphabetical)  in  connection  with  the  exact  alpha- 
betical arrangement  of  names,  as  for  directories. 
Beyond  a  doubt  these  devices  will  quickly  be  developed 
for  cost  accounting  work,  holding  as  they  do  such  possi- 


288  Factory  Accounting 

bilities  of  rapid  handling  of  material  and  labor  cards 
with  small  cost.  The  automatic  cards,  which  require 
preliminary  punching,  will  run  through  a  ''sorter"  at 
the  rate  of  300  cards  per  minute.  The  manually  oper- 
ated sorter  manipulated  by  an  operator  who  depresses 
keys  similar  to  those  of  an  adding  machine  or  a  type- 
writer and  who  works  from  original  data  (made  by 
adding  machine,  typewriter,  pen,  or  pencil)  can  assort 
as  fast  as  the  operator  can  work,  the  present  attained 
speed  being  approximately  118  cards  per  minute. 

Pay  Summaries 

Figure  80  shows  a  form  for  recording  labor  cards, 
coupons,  or  other  form  of  time  reports  on  an  "unlimited 
split"  duplex  machine  after  the  manner  described  on 
pages  168  and  169.  This  purports  to  be  sheet  19  as 
entered  on  folio  2  of  the  General  Exhibit  (Figure  12), 
line  22.  By  reference  to  Figure  80  the  following  written 
totals  may  be  seen,  which,  summarized  for  entry  in  the 
General  Exhibit,  appear  as  follows : 

Productive $9,709.15 

Nonproductive    1,545.35 

Accrued  Labor $11,254.50 

This  form  purports  to  be  for  one  day's  work  and, 
therefore,  the  total  appears  to  be  somewhat  large; 
this,  however,  is  done  purposely  for  reasons  assigned  on 
page  80.  It  is  the  principle  that  is  here  considered 
rather  than  the  value  of  the  figures  in  the  example. 
In  practice  it  is  not  necessary  to  take  a  new  sheet  for 
each  day's  listing;  on  the  other  hand,  the  two  sides  of 
one  sheet  might,  at  times,  take  the  items  for  an  entire 
week. 


Labor  289 

This  sheet  properly  used  in  connection  with  Figure  64 
makes  it  possible  to  maintain  an  accurate  check  on  all 
the  coupons  of  Figure  64  after  they  have  been  detached 
from  the  strip.  Beyond  this  each  adding  machine  total 
can  be  made  to  serve  several  purposes  if  Figure  81  is 
used  in  conjunction  therewith.  A  strip  of  coupons  is 
picked  up  by  the  operator,  who  types  in  first  the  **man 
number."  On  the  next  line  he  types  in  the  first  order 
number,  the  time,  and  the  value  (of  the  time)  and 
*' registers"  them,  following  with  each  coupon  of  pro- 
ductive work,  ''pulling"  therefor  a  ''transfer  total," 
which  prints  the  total  on  the  sheet  indicated  with  a  "  T" 
and  at  the  same  time  registers  the  amount  in  the  "lower 
counter."  Under  one  plan  of  handling  not  illustrated 
the  carriage  is  then  shifted  to  the  "Nonproductive*' 
column,  where  coupons  for  indirect  labor  are  listed  in 
like  manner  as  is  also  the  coupon  for  "delays  when 
under  time  work."  In  similar  manner  a  "transfer 
total"  is  pulled.  When  this  is  done,  a  total  can  be  pulled 
for  the  lower  counter  and  the  impression  can  be  made 
on  the  back  of  the  top  part  of  Figure  64  by  inserting  it 
in  front  of  the  sheet,  or  it  can  be  listed  on  the  sheet 
and  later  crossed  out  or  not  as  desired. 

Under  the  plan  of  handling  shown  in  Figure  80  all  the 
productive  time  is  typed  in  before  the  nonproductive 
time  is  listed.  Sometimes  the  clerk  makes  mental  cal- 
culations from  the  total  of  each  employee's  productive 
time  immediately  after  he  lists  it  in  order  to  see  that 
the  coupon,  or  coupons,  for  nonproductive  time  equals 
the  full  working  hours  of  the  plant.  In  other  caseai 
this  comparison  is  made  after  he  has  listed  all  productive 
time  and  has  gone  back  over  the  coupons  for  nonpro- 
ductive time.    It  is  always  (or  should  be)  compared  at 

one  stage  or  another  to  see  that  "the  sum  of  the  parts 
Id 


290  Factory  Accounting 

equals  the  whole."  As  the  ** upper  counter"  is  used 
for  accumulating  each  employee's  job  items  and  is 
** cleared"  with  each  "transfer  total,"  it  is,  therefore, 
the  ''lower  counter"  which  is  used  for  showing  the 
''subtotal"  at  the  bottom  of  each  succeeding  column  up 
to  the  last  or  grand  total.  The  subtotal  is  indicated  by 
an  "  s  . "  When  the  full  total  of  productive  time  is  regis- 
tered, it  is  still  "pulled"  by  means  of  the  subtotal  key 
in  order  to  retain  in  the  adder  the  means  of  arriving  at 
the  full  amount  of  credit  to  Accrued  Labor  Account. 
When  this  is  done,  it  is,  of  course,  not  possible  to  take 
any  interim  totals  under  the  nonproductive  group,  but  as 
they  are  usually  quite  few  in  number,  an  interim  total  is 
not  necessary. 

In  Figures  47  and  80  is  shown  an  elongated  punch 
hole;  this  is  intended  for  use  in  binders  of  the  flat- 
band  type,  which  need  but  veiy  little  space  at  the  binding 
edge  and  hence  do  not  waste  valuable  space  on  the 
adding  machine  or  adding-typewriter  platen.  The  slot 
is  omitted  originally  in  order  to  expedite  the  handling 
of  sheets,  this  way  being  very  much  less  subject  to  the 
annoyance  of  punched  tabs  catching  in  one  another  and 
tearing.  When  a  sheet  has  been  typed,  perhaps  on  both 
sides,  and  is  ready  for  the  binder,  a  scissors  can  handily 
snip  the  slot  opening  where  it  belongs,  as  indicated  by 
dotted  lines  on  the  binding  edge  of  Figure  80. 

Figure  81  represents  the  master  sheet  of  the  pay  roll 
form.  Slip  sheets  can  be  used  with  this  so  long  as  the 
employees  are  not  changed  too  often,  the  slip  sheets 
being  identically  the  same  as  the  master  sheet,  save  only 
for  the  "descriptive"  space.  The  sheet  as  here  shown 
is  for  use  in  the  adding  machine,  but  a  similar  form 
can  be  devised  for  pen  and  ink  or  typewriter  entries. 


Labor  291 

One  plan  for  Figure  81  is  to  insert  a  sheet  in  the 
adding  machine  or  adding- typewriter  and  "line"  it  to, 
perhaps,  Monday.  The  daily  time  report  summary 
(Figure  64)  of  the  first-named  man  is  then  typed  in  the 
pay-roll  form  under  "Productive"  and  the  carriage 
shifted  to  "Nonproductive,"  using  the  "upper"  counter 
and  the  "lower"  counter  respectively.  The  reports  of 
the  various  employees  named  on  the  page  are  then 
listed  in  like  manner,  each  subsequent  listing  being 
"lined  up"  or  "spotted"  by  tilting  the  carriage  back 
and  turning  the  platen  to  the  desired  place.  "When  the 
bottom  of  a  sheet  is  reached,  a  subtotal  is  pulled  in  the 
corresponding  day  in  the  lowest  or  total  "zone."  This 
operation  is  carried  through  to  the  last  sheet,  where  a 
complete  total  is  pulled  for  the  day's  record.  From 
these  two  totals  a  pen  or  typed  summary  is  made  as 
shown  on  Figure  80.  Under  the  plan  illustrated  all  pro- 
ductive time  is  handled  first  and  sheet  totals  are  accumu- 
lated by  means  of  transfer  totals — then  nonproductive 
is  similarly  handled.  If  for  a  fuller  sense  of  security 
it  is  desired  to  check  the  grand  total,  a  summation  can 
be  made  of  the  totals  mentioned  as  being  typed  on  the 
back  of  Figure  64  (or  on  Figure  80  if  not  on  Figure  64). 
It  is  for  these  reasons  that  Figure  64  is  such  a  time- 
saver  and  at  the  same  time  is  safeguarded  against 
confusion.  While  it  was  not  previously  explained,  these 
strips  of  coupons  are  all  supplied  upon  the  reverse  with 
man  number  and  date  by  means  of  long  strips  of  rubber 
stamp  numbers.  For  example,  for  man  number  347  the 
clerk  in  preparing  the  strip  for  the  next  day  would  pick 
up  No.  3  stamp,  which  would  affix  a  column  of  three's 
from  top  to  bottom  of  the  strip ;  in  like  manner  4  and  7 
would  be  affixed,  making  the  number  appear  on  each 


292  Factory  Accounting 

coupon   several   times    and,   although   ''staggered,"   it 
would  be  in  sequence  and  might  appear  thus : 


3  4 

3  4 

3  4 

3  4 

3  4 


7 
7 
7 
7 
7 


The  day  of  the  month  would  be  affixed  in  like  manner, 
although  in  most  modern  time  recorders  the  date  is 
automatically  affixed  at  the  same  time  the  time  of  day  is. 

With  this  information  on  the  coupon  and  the  coupon 
identified,  it  is  not  necessary  to  write  the  name  or 
other  data  upon  each  coupon,  as  is  necessary  where 
individual  cards  are  used  for  each  job.  In  any  fonn  of 
pay  roll  made  up  from  daily  time  reports  or  of  time 
reports  extending  over  any  portion  of  a  given  pay 
period,  there  is  the  probability  of  a  slight  variation  in 
the  total  of  the  individual  extensions  as  compared  to 
the  "over-all"  measurement,  due  to  the  ''give  and  take" 
on  the  fractions  of  a  cent  in  the  various  calculations, 
as  may  be  seen  in  the  following  typical  list.  These  can 
be  adjusted  by  entries  in  the  "Deductions"  column  of 
the  pay-roll  form,  using  black  ink  for  net  "overs"  and 
red  ink  for  net  "shorts."  In  the  pay-roll  column  a 
grand  total  will  be  taken  of  these  and  the  difference 
charged  or  credited,  as  the  case  may  be,  to  Over,  Short, 
and  Damage  Reserve  Account  (556-557). 


Labor 


293 


294  Factory  Accounting 

$3.50  per  day  of  8  hours  is  $0.4375  per  hour. 

rniirn      Amrmnt.  Ov-pr  RVinrf 


Hours     Amount 

Over 

Short 

7.7=    3.37 

$0.00125 

3.8=    1.66+ 

$0.00250 

2.3=    1.01— 

.00375 

6.8=    2.98— 

.00500 

4.3=    1.88+ 

.00125 

3.7=    1.62— 

.00125 

3.6=    1.58— 

.00500 

5.5=    2.41— 

.00375 

6.8=    2.54— 

.00250 

2.3=    1.01— 

.00375 

3.2=    1.40 

3.8=    1.66+ 

.00250 

23.12 

$0.02625 

$0.00625 

62.8  =  23.10 

.00625 

.02 

$0.02000 

In  Figure  67  is  shown  a  small  card  that  accompanies 
each  dozen  cut  garments  in  an  underwear  mill.  This 
constitutes  the  production  order  as  well  and  all  that 
is  necessary  in  process  work  of  this  kind  where  the 
operatives  perform  their  special  duties  on  all  garments 
that  come  to  them  in  the  course  of  routine.  This  is 
somewhat  similar  in  operation  to  the  bag  number 
strips  mentioned  on  page  215.  The  first  operation 
is  listed  at  the  bottom  of  the  card,  the  second 
operation  next  above  it,  and  so  on.  As  will  be  noticed, 
a  space  is  left  for  the  operative's  check  number  to  the 
right  of  the  symbol  representing  the  operation.  After 
the  check  number  is  inserted,  the  operative  cuts  off  the 
coupon  to  the  right  and  retains  it  as  a  pay  coupon, 
i.  e.,  a  voucher  showing  work  which  has  been  done  for 
which  he  is  entitled  to  the  compensation  printed  on  the 
coupon  (in  cents  and  fractions).  The  operatives  paste 
these  coupons  in  books  prepared  for  the  purpose,  which 


Labor  295 

they  turn  into  the  office  for  pay-roll  purposes.  To  avoid 
fraud  these  cards  or  tags  when  first  issued  are  stamped 
the  length  of  the  tag  with  a  rubber  stamp  of  peculiar 
design.  This  might  be  employed  on  the  operation  strips 
mentioned  on  pages  215  and  216. 

For  the  sold-hour  and  machine-hour  pay  summaries 
or  pay  rolls  (Figure  82)  where  handwriting  is  used, 
the  form  is  headed  for  *' direct"  and  "indirect"  time  or 
** chargeable  hours"  and  * ' nonchargeable  hours"  as 
desired,  for  each  separate  day  of  the  week,  with  space 
provided  for  weekly  summaries  of  each. 

Pay-roll  plans  other  than  those  mentioned  are  numer- 
ous in  form  and  wide  in  scope,  ranging  from  simply 
totals  of  "in"  and  "out"  time  recorded  on  time 
recorder  cards  or  "drum  sheets"  up  to  finely  segre- 
gated records  on  large  sheets. 

Bonus  Eaknings 

Since  the  development  of  scientific  management  prin- 
ciples and  mechanisms  of  organization,  there  has  been 
devised  a  number  of  different  scales  of  increase  in  earn- 
ings or  remuneration  based  on  increased  production. 
What  is  known  as  the  "differential  wage  system"  con- 
sists of  an  ordinary  piece  rate  for  a  normal  output  and 
a  higher  piece  rate  for  more  than  a  normal  output. 
The  so-called  "premium  system"  pays  an  hourly  rate 
with  extra  pay  in  addition  if  the  work  is  done  in  less 
than  a  certain  standard  time.  Another  system  pays  an 
hourly  rate  and  in  addition  a  bonus  on  every  job  done 
within  a  certain  standard  time,  this  bonus  being 
expressed  in  a  percentage  of  the  wages  paid. 

The  basic  idea  of  the  "premium  system"  as  it  is 
ordinarily  known,  is  a  standard  time  or  rate  of  produc- 


296  Factory  Accounting 

tion  with  a  fixed  wage  or  payment  for  this  standard  of 
achievement.  If  the  employee  falls  short  of  the  stand- 
ard, he  is  penalized  by  deductions  from  any  premium 
earnings.  If  he  attains  the  standard,  he  receives  the 
agreed  wage  or  payment  in  full  but  nothing  more.  If 
he  exceeds  the  standard,  he  receives  a  premium  or  bonus 
based  upon  the  excess  achievement. 

Thus,  if  the  standard  time  for  a  certain  operation  is 
five  hours  and  the  workman  by  superior  concentration, 
activity,  or  ability  completes  the  work  in  four  hours, 
an  hour  of  his  time  has  been  saved,  and  under  the  plan 
usually  adopted  half  the  price  of  his  hour's  work  is  his. 
In  addition  to  the  saving  of  time,  overhead  expenses 
are  likewise  saved,  but  this  is  not  recognized  in  the 
employee's  compensation  and  is,  in  practice,  after 
deducting  the  cost  of  operating  the  system,  a  gain  to 
the  manufacturer. 

The  various  bonus  plans  are,  in  the  main,  modifications 
of  the  premium  system  and  provide  for  a  moderate 
bonus  or  premium  for  small  time  reduction  and  a  gradu- 
ated increase  of  bonus  as  time  is  further  reduced.  Thus, 
one  such  system  or  scale  provides  for  a  10  per  cent 
increase  of  wages  for  a  10  per  cent  reduction  in  time, 
a  15  per  cent  increase  of  wages  for  a  20  per  cent  reduc- 
tion in  time,  and  a  20  per  cent  increase  of  wages  for  a 
30  per  cent  reduction  in  time,  etc.  Another  system  has 
a  standard  time  established  for  each  job,  and  during  each 
pay  period  a  record  is  made  of  the  number  of  hours 
worked  by  each  operative  on  the  jobs  on  which  stand- 
ards were  established.  Then  the  total  number  of  hours 
in  which  the  operatives  did  these  standard  jobs  is  divided 
into  the  total  sum  of  the  time  standards,  thereby  arriv- 
ing at  a  percentage  of  efficiency.  From  QQ  per  cent 
efficiency  (which  is  allowed  .0001  as  bonus  of  wages) 


Labor  297 

up  to  90  per  cent  (which  is  allowed  .10  as  bonus)  there 
is  a  graduated  scale  of  increase.  Above  90  per  cent 
efficiency  is  added  the  percentage  above  90  to  100  per 
cent,  and  the  sum  is  the  fraction  of  the  wages  to  be 
paid  as  bonus. 

The  objections  to  plans  of  this  character  are  found 
in  the  intricacies  involved  in  the  calculation  of  premium 
or  bonus  earnings.  Clerks  competent  to  calculate  pre- 
mium earnings  on  a  50  per  cent  basis  are  legion,  while 
to  follow  up  the  more  complicated  schemes  requires  an 
accountant  with  some  of  the  qualifications  of  an  insur- 
ance actuary.  The  employees  are  not  themselves  usually 
apt  at  comprehending  the  complex  slide-rule  calculations 
resulting  from  these  graduated  scales  of  premium,  and 
oftentimes  more  or  less  friction  results.  An  old  adage 
reads  that  "necessity  is  the  mother  of  invention,"  which 
has  proved  as  true  in  this  as  in  other  cases.  An  instru- 
ment has  been  designed  to  determine  the  percentage  of 
elapsed  time  to  standard  time  and  to  disclose  automatic- 
ally in  Arabic  numbers  this  percentage  together  with  the 
value  of  the  bonus  earnings  based  on  that  percentage. 
This  instrument  must  be  specially  equipped  with  which- 
ever scale  or  system  of  rates  it  is  to  be  used  under,  these 
scales  being  interchangeable. 

Still  another  form  of  the  premium  or  bonus  system 
is  based  on  quality  rather  than  on  quantity  of  work. 
Such  a  system  may  be  used  advantageously  in  the 
making,  for  instance,  of  pearl  buttons,  the  work  upon 
which  is  done  on  a  basis  of  avoirdupois,  that  is,  a  given 
price  per  operation  per  pound  of  buttons  produced.  A 
premium  rate  of  perhaps  50  per  cent  over  the  ordinary 
piecework  rate  is  fixed,  but  the  required  standard  must 
be  maintained  in  order  to  earn  the  premium  rate.  A 
system  of  ''docks"  is  applied  for  shortcomings.     The 


298  Factory  Accounting 

nature  of  these  ** docks"  can  be  seen  by  reference  to 
Figure  76,  which  is  an  employee's  earning  record. 

To  determine  the  quality  of  the  product  and  the 
amount  due  employees,  an  inspector  takes  a  carefully 
weighed  ^-pound  sample  out  of  each  lot  as  he  comes 
to  it;  one  sample,  as  a  rule,  being  all  that  is  taken  from 
a  given  lot.  This  sample  is  carefully  scrutinized,  graded, 
and  labeled.  Any  *' docks"  discovered  are  listed  on  the 
employee's  production  report  and  involve  a  predeter- 
mined deduction  from  the  premium  rate. 

In  work  of  this  kind  the  number  of  pounds  put 
through  a  given  machine  under  either  the  ordinary  plan 
or  the  premium  plan  is  approximately  the  same,  but  the 
employees  become  more  rapid  and  more  dexterous  in 
feeding  the  blanks  into  the  various  machines.  A  larger 
quantity  of  first-grade  product  is,  therefore,  produced 
with  a  corresponding  reduction  of  lower-grade  buttons 
and  ** rejects,"  which  are  of  little  or  no  value. 


CHAPTER  XVn 
expense  (overhead) 

Impoktance   of   Proper  Distribution 

Manufacturing  expense  is  the  "hug  bear"  of  the  cost 
finder.  It  is  the  great  cause  of  the  difficulties,  the 
inaccuracies,  and  most  of  the  divergencies  in  both  the 
theory  and  practice  of  cost  finding.  Expense,  or  over- 
head, is  an  important  part  of  manufacturing  costs — 
sometimes  by  far  the  greatest  part — but  it  is  to  a  greater 
or  less  extent  an  intangible  part,  showing  in  results  but 
not  fully  seen,  always  present  but  difficult  to  trace, 
multifarious  in  its  origin  but  united  in  one  burden  on 
production  costs,  and  ever  and  always  exhibiting  an 
almost  unconquerable  tendency  to  swell  these  costs 
unduly. 

In  practice  expense,  or  overhead,  is  the  uncertain 
element  of  cost  accounting;  it  is  an  inevitable  incident 
of  production  but  a  most  elusive  incident,  almost  impos- 
sible of  proper  determination  and  distribution  unless 
the  plan  of  accounting  be  intelligently  devised  and  as 
intelligently  and  faithfully  carried  out. 

Of  the  three  elements  of  production  cost,  the  overhead 
is  unquestionably  the  most  difficult  to  determine  accu- 
rately, and  even  when  this  is  done,  the  end  in  view  is 
but  half  attained.  The  overhead  as  determined  is  still 
to  be  applied  to  the  manufactured  product  so  that  it 
will,  in  connection  with  the  charges  for  labor  and 
material,  disclose  the  true  cost  of  production. 

299 


SOO  Factory  Accounting 

Tlie  important  part  tliat  expense  plays  in  production 
cost  and  the  necessity  for  its  proper  distribution  is  not 
always  recognized.  The  cost  of  labor  and  materials 
stands  out  clearly.  Usually  such  costs  are  closely 
coupled  with  specific  order  numbers,  or  with  mass 
product  in  process,  or  with  departmental  costs  and  are 
brought  into  further  prominence  by  clearly  defined  pay- 
ments at  fixed  times.  The  burden  of  expense,  on  the 
other  hand,  made  up  from  many  varying  sources,  not 
clearly  seen,  indirect  in  its  application,  and  scattered 
as  to  time  of  payment,  is  very  much  more  difficult  of 
determination  and  does  not  seem  so  worthy  of  considera- 
tion. Yet  the  pressure  of  expense,  or  overhead,  is  in 
many  cases  the  factor  that  decides  the  success  or  failure 
of  an  enterprise. 

Overhead  frequently  amounts  to  100  per  cent,  125  per 
cent,  and  even  much  more  of  direct  labor.  It  is  there- 
fore often  actually  more  important  that  the  proper 
apportionment  of  expense  should  be  determined  than 
that  the  actual  labor  cost  should  be  correct.  If  a  dime 
and  a  quarter  are  put  in  a  collection  basket,  it  is  cer- 
tainly more  important  that  the  quarter  should  not  go 
astray  than  that  the  dime  should  be  carefully  looked 
after. 

Cost  accounting  as  a  recognized  art  is  hardly  a  genera- 
tion old  and  has  had  to  overcome  much  shortsightedness 
and  prejudice.  Even  where  methods  are  not  altogether 
archaic,  the  accounting  system  but  seldom  ''measures 
up"  to  the  possibilities.  ''Dead  time,"  "nonproductive 
labor,"  "a  necessary  evil,"  etc.,  are  expressions  often 
used  to  characterize  cost  finding  work  and  where  used, 
are  generally  justified  by  the  results  or  lack  of  results 
obtained  from  the  records.  In  fact,  a  more  extraor- 
dinary jumble  of  figures  having  no  connection  with  each 


301 

ly  particular 
id  *  *  expense 
s.  Very  few 
realize  what 
has  the  least 
an  expansion 
f  so  affected, 
'HI  their  rise 

Many  bank- 
;al  conditions 
Toper  distri- 


'een  different 
a  of  expense 
rable.  Thus 
overhead  the 
)  not.  Some 
anufacturing 
rh  the  store- 
ed  for  future 
I  supplies  to 
used.  Simi- 
ase  costs  run 

)f  uniformity 
f  production 
:ently  and,  in 
0  so,  because 
on  the  same 
ious  that  the 


c«„..... .^.,N. 6^                     Pay  Roll,  week  mde&l[tmr,J<A^ / /  J$l^ 

0„..,„.v  = 

r 

=., 

PROOUCT»C 

NOH-PROOUCTWC      1     roT-^I^X 

jB«r-     ™.,««1 

oioucr.of« 

J  ^,  u.-r„™. 

r,« 

l^r^4 

t;~. 

t»,n«                T,», 

tlrr-a       »..     »^ 

.t,-,       >™ 

^'..-  i 

I 

: 

"•S^tn/.xfCtiw'ni^.v, 

lol 

"Z 

77 

ZJO 

^ 

tJ 

1    r 

%at^'  1"     /! 

21  ( 

1 

-....«.   1?.W.... 

S;J 

, 

-..  J2/. 

si 

ffiS 

-3 

■•« 

1        <■              • 

70  J 

~"' 

ii                7 

„ 

t   1 

, 

^ 

S."' 

■' 

'^              3 

:?:!/. 

^ 

S.0 

jss 

* 

'"              V 

.1.       il             ■ 

3o,^ 

S": 

«,0 

2j!>4 

/ 

J?« 

r": 

i 

J.J             J 

3U. 

S:;: 

- 

Jin  " 

Jft.„r^  Qlr^^JL^Lj'f 

Jolt 

Rj? 

ej 

Z6i 

^ 

a^;     !.<     ' 

„ 

1    ( 

( 

1 

^      .-.-^ 

■n^'it' 

;•» 

!_ 

5                  t 

33 

»'.;■- 

L  li     .' 

?f.'; 

Kr 

4 

-13                  y 

( 

1 
1 

^ 

Tt,"" 

"0 

* 

J- 

It 

3:,'A 

S'.t 

?^ 

■- 

1  i 

^ZrJ,    JfjaUiZ^iymi, 

7of? 

~,". 

«:S 

"0 

. 

1     JS 

7' 

1 

"     (T,Ccur^^ 

K 

3S 

i'X 

- 

.!   ji     •■ 

U^   -^am,ffi?,„. 

?^r 

w"' 

fi5 

"o 

I. 

1 

Jh^ 

rSf; 

.1 

37/. 

J^ 

S-O 

-- 

.1.   <■'    " 

■S^m^  OijUr.£. 

7rz 

3Ja 

<■ 

>■  ■ 

1 

1 

'=(^> 

TKu.' 

4. 

as             It 

37 'A. 

liV: 

?S 

- 

,    [(    ,1 

I>t.IJ^  U^^, 

:'c/i 

"r 

,1 

f^ . 

,c       !! 

w 

1 

f      3 

r^  ^ 

r,'' 

.4 

°               3 

rs 

.?? 

S'.'i- 

X 

I   i«        J 

jA<r 

£■ 

.(   S 

n 

?< 

1 

1 

.f?u«!^ 

rh;."' 

:l 

.17                  ^ 

U 

14-1. 

s'.V 

X 

-if  is     . 

VfiLY  rorALi 

(S  sJ 

il 

Jl!           8 

499 

*t 

■^1T 

ro-r>L,o„wtc^ 

im^.i 

/i-^.oS 

.s-.g 

2S,°     ;     \ 

Ln,i    \mu 

" 

:  ^m 

(Ait IMS  M/ttlMt  K'nMiftCl) 

1 

Fio.  81.— Pay  Roll  Master  SLeet 


Expense  {Overhead)'  301 

other  and  no  significance  in  relation  to  any  particular 
job  cannot  be  found  than  the  so-called  '*  expense 
accounts"  of  most  manufacturing  businesses.  Very  few 
persons,  even  of  those  who  use  them  daily,  realize  what 
they  mean  practically.  No  one,  commonly,  has  the  least 
idea  how  they  are  likely  to  be  affected  by  an  expansion 
or  shrinkage  in  the  volume  of  work,  and  if  so  affected, 
what  conclusions  can  be  safely  drawn  from  their  rise 
or  fall. 

There  is  no  excuse  for  such  conditions.  Many  bank- 
ruptcies are  the  result  of  ignorance  of  the  real  conditions 
which  would  have  been  revealed  by  the  proper  distri- 
bution of  the  expense  overhead. 

Uniformity  in  Peacticb 

A  general  uniformity  of  practice  as  between  different 
establishments  with  respect  to  the  relation  of  expense 
charges  to  production  costs  is  very  desirable.  Thus 
some  concerns  charge  into  manufacturing  overhead  the 
item  of  interest  on  investment.  Others  do  not.  Some 
concerns  charge  supplies  directly  to  manufacturing 
expense  without  first  putting  them  through  the  store- 
room, even  though  a  large  supply  is  purchased  for  future 
use.  Others,  more  properly,  charge  such  supplies  to 
overhead  expense  only  as  they  are  actually  used.  Simi- 
lar variations  of  practice  in  charging  expense  costs  run 
through  the  entire  production  process. 

As  one  of  the  consequences  of  this  lack  of  uniformity 
concerns  manufacturing,  similar  lines  of  production 
cannot  compare  costs  of  production  intelligently  and,  in 
fact,  fail  dismally  when  they  attempt  to  do  so,  because 
their  respective  costing  charges  are  not  on  the  same 
basis.    Under  such  circumstances  it  is  obvious  that  the 


302  Factory  Accounting 

production  cost  of  similar  goods  in  these  different  fac- 
tories must  necessarily  vary  materially — a  condition 
which  leads  to  puzzling  and  unwarranted  variations  in 
quotations,  sometimes  very  perplexing  to  competitors 
and  occasionally  very  disastrous  to  the  quoting  concern. 
The  average  manufacturer  does  not  know  what  his 
goods  cost  him.  A  prominent  ofiScial  of  a  large  corpo- 
ration is  reported  as  saying  that  when,  before  the 
formation  of  their  combination,  he  was  at  the  head  of 
an  independent  factory,  he  used  to  wonder  sometimes 
how  his  competitors  could  afford  to  take  contracts  at 
the  figures  they  did.  When  the  books  of  these  concerns 
were  opened  to  his  inspection  by  the  consolidation,  he 
discovered  that  these  competitors  had  never  known  even 
approximately  the  cost  of  manufacturing  their  goods 
and  as  a  result  of  the  system  of  unintelligent  ''smear- 
ing" of  their  overhead  cost,  they  had  not  infrequently 
taken  contracts  at  an  absolute  loss. 

Expense  Diffusion 

In  determining  the  expense  items  properly  applicable 
as  factory  costs,  a  sharp  line  must,  of  course,  be  drawn 
between  the  two  broad  classes  of  expense — manufactur- 
ing expense  and  commercial  or  selling  expense.  Items 
which  pertain  purely  and  simply  to  the  sale  of  product 
have  no  place  in  the  cost  of  production.  This  is  also 
true  of  those  other  commercial  expenses  which  have  to 
do  more  or  less  directly  with  the  delivery  of  the  product 
and  with  collections  such  as  cash  and  quantity  discounts, 
crating,  hauling,  freight  on  outgoing  product,  allow- 
ances after  product  has  left  the  factory,  etc.  Such 
expenses  are  a  proper  charge,  direct  or  indirect,  to 
loss   and  gain,  but  not  through  production,   and   any 


Expense  {Overhead)  303 

attempt  to  fasten  them  on  production  will  be  a  purely 
arbitrary  process,  entirely  without  advantage  and 
entirely  destructive  of  accurate  costs. 

"With  a  proper  segregation  of  commercial  costs  and 
of  production  costs  and  with  a  full  knowledge  of  these 
latter,  a  just  and  proper  selling  price  can  readily  be 
determined.  Also  the  proper  and  economical  conduct 
of  the  production  and  the  selling  departments  is  greatly 
facilitated.  This  cannot  be  done  where  the  two  classes 
of  expense  are  not  clearly  separated. 

Various  methods  of  distributing  expense  are  in  use, 
differing  in  principle  and  involving  distinctly  different 
processes  in  execution.  They  have  been  largely  devised 
by  men  who  are  engaged  or  interested  in  certain  lines 
of  manufacture  and  who  have  evolved  methods  suited 
to  the  conditions  in  their  own  plants  or  in  plants  of 
similar  nature.  Under  such  circumstances  it  is  a  natural 
result  that  there  are  now  various  methods  of  expense 
diffusion  recognized  as  standard,  each  of  which  is 
suited  to  certain  conditions  and  entirely  inapplicable 
when  these  conditions  do  not  exist. 

No  matter  what  be  the  exact  method  of  diffusing  the 
overhead  and  of  determining  the  precise  proportion 
per  unit  of  production,  the  fair  and  just  distribution  of 
manufacturing  expense  over  the  various  departments 
affected  is  absolutely  necessary  to  any  accurate  system 
of  factory  accounting.  Up  to  this  point  all  the  various 
classes  of  production  as  grouped  or  classified  in 
Figure  31  are  in  the  same  category,  without  exception 
or  modification. 

It  will,  of  course,  be  recognized  that  a  broad  and  gen- 
eral apportionment  of  manufacturing  expense  as  a  whole 
over  the  various  departments  is  wrong  both  in  theory 


304  Factory  Accounting 

and  practice.  The  results  when  this  is  done  do  not  give 
information  as  to  the  component  constituents  of  cost — 
one  of  the  most  vahiable  features  of  a  factory  account- 
ing system — and  do  not  even  show  actual  costs. 

On  the  other  hand,  there  is  no  possible  way  of  entirely 
avoiding  a  prorating  or  averaging  of  expense.  No 
amount  of  detective  ^vork  economically  possible  will  trace 
down  and  definitely  place  every  item.  Each  expense 
should,  however,  be  traced  down  and  segregated  so  far 
as  possible  to  the  process  or  product  to  which  it  applies. 
When  it  can  be  segregated  no  further,  it  must  then  be 
averaged  over  the  remaining  process  or  remaining 
products. 

Beyond  this  there  is,  of  course,  in  expense  apportion- 
ment an  economically  irreducible  minimum  which  can- 
not be  definitely  allocated  even  to  groups,  and  this  must 
be  distributed  as  equitably  as  may  be  by  averages  or 
arbitrary  adjustment  over  the  entire  output.  The  only 
purpose  of  making  an  analysis  is  to  learn  how  to  build 
up  the  synthesis. 

When  the  factory  conditions  are  such  that  there  can 
be  no  positive  line  of  demarcation  between  departments, 
or  if  machines  in  operation  are  so  promiscuously  inter- 
mingled that  departmentalizing  is  a  matter  of  arbitrary 
adjustment,  then  presumably  the  accounting  processes 
will  have  to  adjust  themselves  to  conditions,  and  expense 
will  be  treated  in  the  same  arbitrary  way.  A^Tien  this  is 
done,  the  accounting  results  will  naturally  show  a  cor- 
responding lack  of  sharp  definition  and  accuracy. 

The  best  method  of  distribution  is  that  which  mini- 
mizes so  far  as  practical  the  amount  of  indirect  costs  to 
be  diffused  on  an  arbitrary  basis — the  method  which 
charges   the   greatest   amount   of   so-called   ** indirect'* 


Expense  (Overhead)  305 

expense  directly  to  the  product  to  which  it  really  belongs, 
provided  the  system  is  not  carried  so  far  as  to  be  in 
itself  top  heavy  and  economically  wasteful. 

Under  such  a  system  many  of  the  usual  overhead 
expenses  become  direct,  and  the  department  and  the 
product  to  which  they  properly  belong  receive  the  proper 
charge,  whereas  otherwise  these  expenses  must  be  arbi- 
trarily diffused  over  all  the  departments,  or  when 
assigned  more  or  less  accurately  to  one  department, 
tnust  be  diffused  over  all  the  products  of  that  depart- 
ment. 

The  Labor-Peecextage  Plan 

The  departmental  segregation  of  expense  is  identi- 
cally the  same  in  principle  in  any  plan  of  accurate  cost 
finding.  When,  however,  we  come  to  the  direct  diffusion 
of  expense  over  product,  we  find  sharply  divergent 
methods.  The  selection  of  the  particular  method  will 
depend  to  some  extent  upon  physical  conditions  in  the 
plant  and  upon  the  plan  of  labor  records  maintained. 

Under  the  percentage  plan,  the  labor  cost  or  the  labor 
and  material  cost  of  each  job  is  ascertained,  and  a  cer- 
tain percentage  is  added  thereto  for  expense  or  over- 
head. This  percentage  of  overhead  is  either  estimated 
or  determined  from  the  records  of  past  performance. 

This  is  a  rough  and  ready  means  which  we  have 
inherited  from  another  age.  Under  simple  conditions 
where  the  processes  and  the  products  are  fairly  uniform 
in  character,  the  loading  of  expense,  or  overhead,  on  the 
basis  of  direct  productive  labor  costs  is  reasonably 
accurate,  but  as  conditions  becomes  more  complex,  the 
method  loses  such  accuracy  as  it  had  until  it  cannot  be 
safely  employed. 

20 


306  Factory  Accounting 

This  method  used  is  largely  in  groups  E,  F,  G,  and  H 
in  Figure  31  and  is  not  at  all  applicable  to  the  **  con- 
tinuous" class  of  production,  with  the  exception  per- 
haps of  some  of  the  industries  subsidiary  thereto. 

When  such  a  method  is  applied  to  a  shop  or  a  depart- 
ment in  the  ''assembling"  class  in  which  large  and  small 
machines,  cheap  and  highly  paid  labor,  heavy  castings, 
and  small  integrants  are  simultaneously  involved,  the 
method  is  no  longer  trustworthy.  On  the  contrary,  it  is 
absolutely  unscientific  and  unsafe. 

The  reason  for  this  is  found  in  the  varying  nature  of 
the  charges  involved,  which  cannot  properly  be  taken 
in  bulk  and  diffused  over  product  equitably  on  the  basis 
of  labor  cost.  Thus  the  expense,  or  overhead  must  take 
cognizance  of  the  interest  factor,  the  varying  space 
occupied  by  different  machines,  the  varying  volume  of 
power  required  to  drive  these  machines,  the  varying 
rates  of  depreciation,  the  variations  of  labor  efficiency, 
of  supervisory  requirements,  etc.,  which  bear  no  direct 
relation  to  the  cost  of  labor.  The  cost  of  labor  is  then 
an  absolutely  arbitrary  basis  of  distribution,  bearing  no 
necessaiy  relation  to  the  expense  burden  of  product  and 
selected  as  a  basis  of  distribution  only  because  it  is  con- 
venient. The  weight  of  the  product  might  be  taken  as 
a  basis  of  expense  distribution  with  equal  logic,  and  on 
a  simple,  unvarying  product  where  expenses  run  with 
reasonable  uniformity,  weight  would  work  as  well  as 
would  labor  cost.    There  is  no  reason  for  selecting  either. 

The  principle  of  loading  overhead  on  labor  cost  is 
based  upon  the  idea  that  the  product  increases  in  value 
according  to  the  amount  of  labor  added  to  it  and  that 
the  greater  the  amount  of  labor  involved  in  the  manu- 


Expense  (Overhead)  307 

facture,  the  greater  the  expense  required  to  supervise 
this  labor  and  conduct  the  business. 

This  is  true  within  the  narrow  confines  of  its  own 
operation,  but  it  does  not  cover  the  whole  field.  There 
are  other  factors  in  production  besides  labor,  and  these 
frequently  predominate.  If  a  manufacturer  through 
competition  is  forced  to  reduce  costs  on  a  certain  article, 
it  would  be  absurd  for  him  to  consider  that  hiring 
cheaper  workmen  would  reduce  not  only  labor  cost  but 
also  overhead  as  well,  as  the  lowering  of  labor  cost  by 
hiring  cheaper  workmen  would,  quite  likely,  only  result 
in  raising  the  cost  at  the  veiy  point  where  it  would  be 
shown  to  have  decreased. 

Cheaper  labor,  without  improved  machinery  to  com- 
pensate for  any  differences,  means  more  spoiled  material 
and  fewer  units  of  product  per  day  per  operative,  both 
of  which  factors  make  for  increased  total  burden  rate, 
and,  in  the  last  analysis,  the  raising  of  net  cost  per  unit 
when  the  total  of  all  units  is  divided  into  the  total  of  all 
production  costs. 

Viewed  from  another  angle,  if  the  manufacturer  is 
successful  in  installing  efiiciency  methods  to  reduce  his 
cost  of  production  and  can  increase  production  while 
even  raising  wages,  it  is  a  foregone  conclusion  that 
while  the  cost  per  unit  of  production  is  perhaps  mate- 
rially reduced,  as  shown  in  the  following  example,  yet 

Material    $20.00  $25.00 

Labor    20.00  21.00 

Overhead   20,00  26.00 

$60.00  $72.00 

Units  produced    100  125 

Cost  per  unit 60  .576 


308  Factory  Accounting 

the  percentage  of  overhead  to  direct  labor  is  very 
shaiply  increased  by  reason  of  the  cost  of  maintaining 
the  cost  and  efficiency  system,  thus  making  what  might 
appear  as  an  alarming  state  of  affairs  when  quite  the 
reverse  existed. 

As  a  broad  example  of  how  little  labor  cost  can  be 
depended  on  as  an  equitable  basis  of  loading  the  over- 
head cost,  unless  taken  for  short  periods  and  under 
carefully  watched  conditions,  the  case  of  an  expert 
workman  working  alongside  an  apprentice  may  be  cited. 
The  latter 's  skill  has  perhaps  come  to  equal  that  of  the 
expert  workman,  and  on  certain  kinds  of  work  he  can 
turn  out  as  large  a  volume  as  the  former.  Yet  there  is 
a  wide  difference  in  wage  rates,  and  as  a  result  on  a  per- 
centage basis  the  work  of  the  expert  is  penalized  by 
an  overload,  while  the  work  of  the  apprentice  is  under- 
charged. 

Again  in  the  case  of  two  machines  of  like  character 
but  of  different  speeds,  the  one  turning  out  twice  as 
great  a  volume  of  product  as  does  the  other,  we  find  an 
equal  uncertainty  in  the  diffusion  of  overhead  under  the 
percentage  plan.  Thus,  if  the  operator  of  the  high- 
speed machine  receives  twice  the  wage  paid  the  operator 
of  the  low-speed  machine — quite  unusual — it  will  be  seen 
that  the  expense  burden  per  unit  estimated  as  a  per- 
centage of  labor  cost  is  the  same  in  either  case. 

This  is  obviously  incorrect.  High  production  means 
low  overhead,  and  low  production  means  high  over- 
head. The  facts  are  that  while  the  fast  machinery 
requires  more  power,  it  does  not  require  twice  as  much; 
nor,  within  reasonable  limitations,  is  the  wear  and  tear 
of  the  rapidly  moving  machine  twice  as  great  as  the 
slower  moving  machine.     These  factors   are  the   only 


Expense  {Overhead) 


309 


"" 

•% 

1. 
c 
■oo 
*c 

*c 

>• 

J3 

E 

3 

$ 

U 

.c 

f) 

E 

»1 

c 
o 

1 
g 

o 

11 

E 

1 

o 

•5 

u 

1- 

a. 

3 
V 

•o 

o 

£ 

s- 

a 

j= 
;3 

o 

1^1 

CL 

-a 

o 

c 
c 

1 
.1 

c 

0 

1- 

l< 

- 

~ 

- 

i 

a: 
10 

ID 

< 

•a  S 

i 

a: 

a 

PAY  ROLL 

For  week  er 

< 

5 

ll- 

(Q 

< 

_ 

1      ^ 

1 

n 

UJ 

z 
a 

lU 

ID 

^ 
•& 

< 

<     a 

Q 

u 

ID 

< 

z 

0 

S 

D 

o: 
S 

< 

•5 

£ 

z 

Total 
Total 

o 

. 

f 

J 

? 

<l 

N- 

7 

^ 

w 


P=H 


Pd 


310  Factory  Accounting 

ones  disturbed  by  tlie  increase  of  speed.  The  other 
items  in  the  overhead  remain  the  same,  and  the  over- 
head rate  per  unit  should  then  be  materially  lower  for 
the  fast  machine  than  for  the  slow  one.  If  the  labor 
cost  for  the  fast  machine  were  identical  with  that  of  the 
slow  machine,  the  burden  of  the  expense  w^ould  be  the 
same  in  either  case,  which  is  obviously  incorrect,  since 
the  output  of  the  faster  machine  must  stand  the  added 
expense  of  both  increased  power  consumption  and 
increased  wear  and  tear. 

It  is  apparent  that  there  is  a  point  at  which  wages 
could  be  fixed  where  the  expense  burden  would  be  prop- 
erly distributed,  but  it  is  equally  apparent  that  any 
system  of  expense  that  requires  a  wage  adjustment  in 
each  case  for  a  proper  distribution  of  expense  is  funda- 
mentally wrong. 

The  Man-Houk  Plan 

Under  this  plan  the  total  number  of  direct  productive 
hours  of  labor  in  each  department  for  each  month  or  cost 
period  is  divided  into  the  total  amount  of  the  manu- 
facturing overhead  in  that  department  for  the  same 
period,  thereby  arriving  at  a  constant  per  productive 
hour  in  each  department.  Each  shop  order  in  process 
can  then,  in  each  successive  department,  be  loaded  with 
an  amount  of  overhead  equal  to  the  number  of  produc- 
tive hours  it  has  consumed,  multiplied  by  the  depart- 
mental constant.  This  differs  from  the  percentage  plan 
in  taking  the  hours  of  labor  instead  of  the  cost  of 
labor  as  the  basis  for  distribution  of  expense.  Under 
the  man-hour  system  the  cost  of  labor,  from  the  stand- 
point of  overhead  distribution,  is  of  no  importance.    In 


Expense  (Overhead)  311 

other  words,  the  man-hour  charge  is  a  time  charge  with- 
out relation  to  labor  cost. 

The  man-hour  plan  of  distributing  manufacturing 
overhead  is  much  more  logical,  more  generally  available, 
and  more  accurate  than  is  the  percentage  plan.  Each 
employee  in  a  factory,  whether  man,  woman,  or  child, 
requires  the  same  amount  of  attention  in  a  general  way 
as  does  the  next  one.  Each  employee  must  have  his 
place  on  the  pay  roll,  time  reports  to  be  accounted  for, 
a  peg  or  locker  for  his  clothing,  toilet  facilities,  soap, 
towels,  wash  water,  drinking  water,  casualty  insurance, 
etc.,  and  it  costs  no  more  in  one  case  than  in  another  no 
matter  what  the  difference  in  wage  rates  may  be.  Also, 
for  all  practical  purposes  each  employee  takes  up  an 
equal  amount  of  factory  space  physically  and,  if  he  be 
a  slow  worker,  is  narrowing  the  possible  volume  of  out- 
put of  product  of  his  department  even  though  he  be  a 
low-priced  man. 

By  applying  a  cost  per  hour  for  overhead  it  is,  as 
stated,  in  effect  a  time  charge — a  toll  charge  for  the 
benefit  accruing  from  the  use  of  the  department's  con- 
veniences, based,  as  in  the  case  of  the  long-distance 
telephone,  on  the  length  of  time  these  conveniences  are 
used  and  not  on  the  amount  of  money  involved  in  the 
operation,  as  in  the  case  of  the  telephone  in  the  conversa- 
tion. The  labor  hours  by  which  this  time  is  measured 
is  merely  a  convenient  way  of  arriving  at  the  time  the 
particular  job  is  "on  the  line." 

"Where  the  man-hour  plan  of  distribution  is  to  be 
employed  it  should,  by  all  means,  be  used  independ- 
ently in  each  individual  department.  A  man-hour  con- 
stant taken  for  the  factory  as  a  whole  is  absolutely 
valueless  as  far  as  accurate  cost  finding  is  concerned. 


312  Factory  Accounting 

The  logical  time  for  spreading  costs  by  the  man-hour 
plan  and  the  necessary  time  for  exact  results  is  at  the 
close  of  the  month  or  of  the  four-week  cost  period.  It 
frequently  happens,  however,  that  production  costs  are 
desired  before  the  close  of  the  cost  period,  and  then 
some  slight  element  of  guesswork  must  enter  into  the 
calculations  if  it  be  during  the  first  month  of  installa- 
tion. Subsequently  in  a  going  institution  the  man-hour 
rate  should  at  all  times  be  maintained  at  a  fairly  close 
mean  average. 

As  a  matter  of  fact,  many  factories  within  the  author's 
knowledge  obtain  the  man-hour  constant  but  four  times 
a  year  and  secure  fairly  accurate  results,  especially 
where  the  line  of  product  is  unvarying.  One  industry 
which  goes  very  deeply  into  cost  finding  determines  and 
uses  each  month  the  average  rate  for  the  twelve  months 
last  past,  thus  getting  a  "constant"  embodying  all 
seasonal  conditions. 

On  Figure  20  it  may  be  noticed  that  both  the  "cost 
charges"  and  the  "credits"  groups  show  a  column 
for  "elapsed  time."  By  having  similar  debit  and 
credit  (memoranda  only)  columns  for  elapsed  time  in 
conjunction  with  Goods  in  Process,  Overhead  (control- 
ling) Account,  there  can  always  be  seen  the  exact  "con- 
stant" rate  per  hour  of  the  net  balance  of  "diffused 
overhead"  still  in  work. 

The  Sold-Houb  Plan 

The  method  of  absorbing  the  overhead  element  under 
the  sold-hour  plan  of  cost  finding  is,  to  all  intents  and 
purposes,  similar  to  that  of  the  man-hour  plan,  as 
discussed  beginning  with  page  203.  The  only  practical 
difference  is  in  the  method  of  applying  the  expense  con- 


Expense  (Overhead)  313 

stant.  Under  the  man-hour  plan  the  actual  pay-roll 
cost  of  the  direct  producing  labor  is  charged  directly 
to  the  individual  job  order  numbers  to  the  exact  extent 
of  time  occupied  by  workmen  on  such  orders.  When 
this  is  done,  the  overhead  constant  is  added  to  the  cost 
of  the  job  on  the  basis  of  the  number  of  productive 
hours  the  work  has  been  in  process. 

The  sold-hour  plan,  on  the  other  hand,  contemplates 
averaging  all  direct  producing  labor  costs  in  each  depart- 
ment  (Fig-ure  82)  and  arriving  at  a  departmental  flat 
cost  per  hour,  called  the  "pay-roll  hour,"  to  which  is 
added  the  constant  of  overhead  as  described  under  the 
man-hour  plan,  thus  arriving  at  the  cost  of  the  sold  hour 
in  that  department.  The  charges  for  product  are  then 
the  cost  of  material  and  the  cost  of  sold  hours  consumed, 
with  a  margin  of  profit  arbitrarily  added. 

This  plan  of  absorbing  the  expense  constant  through 
the  medium  of  the  labor  cost  is  thought  by  some  to  be 
more  simple  in  operation  than  is  the  man-hour  plan,  and 
possibly  it  is,  where  the  average  hour  can  be  used,  as  in 
Figure  31  under  Class  H.  But  it  would  be  cumbersome 
to  apply  it  in  any  system  of  costs  where  hours  of  many 
varying  labor  values  are  employed. 

The  Machine-Houk  Plan 

The  characteristic  feature  of  the  distribution  of 
expense  under  the  machine-hour  plan  is  the  practical 
elimination  of  ordinary  indirect  expense.  Every  expense 
is  traced  down  as  far  as  possible  and  applied  directly 
to  product  through  a  gross  hourly  charge  for  the 
machine  service.  The  method  somewhat  resembles  that 
of  the  man-hour  plan  but  goes  much  further  into  detail, 
using  the  individual  machine,  or  groups  of  machines, 


314  Factory  Accounting 

as  the  unit  for  the  distribution  of  expense,  instead  of 
the  department,  as  under  the  man-hour  plan. 

A  comparison  of  the  machine-hour  with  the  man-hour 
plan  reveals  about  the  same  difference  in  refinement  of 
application  as  would  obtain  between  a  man-hour  plan 
based  on  the  factory  as  a  whole. 

Without  doubt  where  it  can  be  used,  the  modem 
machine-hour  plan  is  the  most  scientific  and  accurate 
of  all  methods  of  diffusing  overhead  costs,  or  burden 
over  products.  The  method  is  comparatively  simple  in 
operation  when  once  properly  installed,  but  on  account 
of  a  very  fine  application  of  costs,  its  installation  is  a 
matter  of  difficulty,  requiring  a  thorough  knowledge  of 
the  principles  involved  and  of  their  proper  application. 

The  List-Pekceftage  Plan 

The  method  of  absorbing  the  expense  element  under 
the  list-percentage  or  standard-cost  plan  varies  materi- 
ally from  that  of  the  percentage  plan.  Instead  of  a 
general  or  fixed  percentage  upon  the  value  of  either  of 
the  constituent  physical  elements,  material  and  labor, 
the  expense,  or  overhead,  is  expressed  as  a  percentage, 
determined  by  tests,  or  estimates,  or  reference  to  records 
of  past  production,  of  a  list  price  of  the  different  articles 
of  the  product  involved. 

The  list-percentage  plan  involves  another  feature  not 
characteristic  of  the  ordinary  percentage  plan;  that  is, 
a  sharp  supervision  is  kept  over  the  variations  for  the 
cost  period  of  the  debits  and  credits  to  each  depart- 
mental expense  account,  with  occasional  adjustments  as 
needed  to  allow  for  and  minimize  the  effect  of  such  varia- 
tions. Also  specific  tests  are  made  from  time  to  time  to 
the  end  that  the  constituent  element  of  the  cost  of  each 


Expense  (Overhead)  315 

article  of  the  product  may  be  kept  at  a  fairly  correct 
percentage  of  its  list  price. 

On  page  187  under  the  caption  ''Standard  Costs,"  will 
be  found  a  further  treatment  of  the  general  plan.  This 
plan  may  be  found  applicable  to  a  greater  or  less  degree 
to  certain  lines  of  product  in  any  of  the  groups  from 
A  to  G  inclusive,  of  Figure  31.  It  serves  its  fullest  use- 
fulness, however,  in  Groups  B,  F,  and  G. 

The  Process  Plan 

This  method  of  diffusing  or  allocating  expense,  if 
properly  practiced,  considers  the  departmental  over- 
head as  the  unit,  just  as  do  all  the  other  correctly  devised 
expense  plans.  In  Figures  24,  25,  and  26  can  be  seen 
typical  applications  of  the  departmental  overhead  to  the 
product  under  the  process  plan. 

The  process  method  is,  with  proper  modifications, 
applicable  to  any  group  under  "continuous  production" 
in  Figure  31.  The  precise  application  is  a  constant  per 
ton,  pound,  yard,  gallon  or,  in  fact,  any  unit  of  weight 
or  measure  of  solids,  liquids,  or  gases. 

Where  there  are  several  different  grades  of  mass 
product  passing  through  the  same  departmental  process 
but  which  do  not  average  up  well  to  a  common  standard, 
then  an  adaptation  of  the  point  system  as  described  in 
Chapter  XIII  beginning  with  page  207  can  be  used  to 
advantage.  An  example  of  such  an  industry  is  a  terra 
cotta  works.  Here  various  grades  are  produced  involv- 
ing a  wide  difference  in  process  cost  per  ton  of  product. 
Some  plain  rectangular  pieces  require  little  or  no  design- 
ing work  and  are  easy  and  simple  to  handle,  while  aa 
the  other  extreme  may  be  cited  an  intricately  detailed 
pattern   specially   designed   for   a  big  building  by   an 


316  Factory  Accounting 

artist  of  high  merit  and  involving  workmanship  of  high 
order  and  requiring  extremely  great  care  in  handling. 
This  latter  product  while  having  some  processes  in 
common  with  the  simple  grades,  in  so  far  as  cost  is  con- 
cerned, has  wide  divergences  when  the  loading  of  over- 
head is  considered.  The  high-class  goods  must  bear  the 
brunt  of  the  designing  cost,  else  the  simpler  grades  will 
be  heavily  penalized  and  thus  destroy  the  accuracy  of  the 
cost  statistics. 


CHAPTER  XVIII 
expense  analysis 
Analyzing  Expense 

Expense  items  for  term  charges  as  they  accrue  should 
be  analyzed  from  invoices  or  original  entries  on  an 
analysis  sheet  suited  to  the  needs  of  the  particular 
business.  These  needs  do  not  vary  to  any  extent  in  prin- 
ciple but  for  the  most  part  in  size  of  sheet  or  number 
of  segregations  involved.  Figure  83  shows  a  typical 
form  of  Expense  Analysis  Sheet.  In  this  analysis  are 
included  items  which  are  direct  charges  to  departments, 
and  also  items  which  are  partially  or  wholly  applicable 
to  administrative  or  commercial  costs. 

At  times  comparatively  heavy  expenses  are  incurred 
applicable  to  costs,  which  have  not  been  foreseen  and 
which  cannot  properly  be  regarded  as  capital  expendi- 
tures and  yet  which  cannot  with  equity  be  charged 
against  the  expenses  of  a  given  cost  period.  To  this 
class  of  expenditures  belong  insurance  items  paid  in 
advance,  interest  charges  paid  before  such  interest  act- 
ually accrues  (if  not  handled  through  account  552,  Fig- 
ure 9),  the  installation  expenses  of  a  cost  system,  and 
other  professional  services,  the  benefit  from  which 
extends  over  subsequent  periods.  Office  stationery  and 
supplies  are  frequently  put  in  this  same  category. 

In  any  such  case  the  item  may  be  charged  to  the 
proper  account  in  the  ''suspense"  section  of  the  Private 

317 


318  Factory  Accounting 

Ledger.  From  the  amount  thus  established  a  monthly 
or  periodical  apportionment  is  made  by  crediting  the 
particular  suspense  account  and  charging  the  proper 
expense  account.  (See  Figure  9  and  corresponding 
classifications  on  Figure  83).  The  monthly  amount  to 
be  charged  from  the  suspense  account  rests  in  the  judg- 
ment of  the  management  or  of  the  accountant  in  charge 
and  will  under  some  conditions  vary  for  the  different 
months  according  to  the  proportion  of  benefit  received. 
The  whole  matter  is  one  that  should  be  governed  strictly 
by  the  facts;  that  is,  the  reservation  must  be  justified 
and  the  succeeding  periods  must  be  actually  benefited  by 
the  expenditures  to  the  same  degree  as  is  the  current 
period  or  in  proportion  to  the  amount  charged  to  such 
periods. 

In  Figure  9,  the  *' suspense  account,"  Group  K,  is 
shown  as  a  deferred  charge,  indicating  that  these  items 
have  no  debt-paying  qualifications.  Such  accounts  should 
be  kept  distinctly  separate  and  apart  from  other  asset 
accounts  in  order  to  avoid  misleading  impressions. 

On  the  opposite  side  of  the  balance  sheet  shown  in 
Figure  9,  under  '^ deferred  credits,"  Group  N,  is  shown 
a  number  of  so-called  "reserves."  These  differ  from 
the  suspense  accounts  of  the  preceding  section,  inasmuch 
as  the  expenses  they  cover  are  anticipated.  They  repre- 
sent items  set  aside  and  built  up  from  month  to  month 
for  some  specific  purpose  or  for  the  meeting  of  demands 
accruing  as  time  proceeds  and  as  yet  not  due  and  pay- 
able. Such  demands  may  perhaps  be  of  an  intangible 
nature  as,  for  instance,  where  the  actual  liabilities  are 
being  incurred  but  where  the  amount  of  such  liabilities 
cannot  be  positively  measured,  weighed,  or  counted  imtil 
some  future  period. 


Expense  Analysis  319 

Eeservations  of  this  kind  are  made  as  the  occasion 
arises,  and  such  monthly  or  periodical  amounts  are 
credited  to  them  and  charged  into  costs  as  may  in  the 
judgment  of  the  management  seem  necessary.  If  justly 
determined,  they  will  provide  an  adequate  reserve 
against  which  costs  of  the  nature  mentioned  may  prop- 
erly be  charged  as  they  become  payable. 

The  amount  of  the  monthly  or  periodical  credit  for 
such  reservations  may  or  may  not  be  sufficient  to  absorb 
ultimately  all  the  anticipated  costs.  If  the  credit 
actually  made  proves  to  be  insufficient,  the  account  called 
** Factor  of  Safety"  (N  560)  may  be  called  upon  to 
absorb  the  difference. 

The  Factor  of  Safety  Account,  as  its  name  indicates, 
is  a  general  reservation  to  cover  unf  orseen  contingencies. 
The  account  should  not  be  used  to  establish  a  secret 
reserve  with  which  balance  sheet  figures  may  be  manip- 
ulated, but  should  be  honestly  confined  to  such  amount 
as  is  conservatively  estimated  will  cover  the  probable 
demands  upon  it.  This  is,  of  course,  purely  a  matter  of 
estimate,  and  if  at  the  close  of  a  fiscal  period  the  balance 
of  the  Factor  of  Safety  Account  is  found  to  be  unreason- 
ably large,  a  portion  or  all  the  balance  may  be  absorbed 
into  the  Profit  and  Loss  Account. 

Expense  Summaeies 

In  Figure  83  the  extreme  right-hand  column  is  devoted 
to  summaries  of  various  kinds.  Periodical  apportion- 
ments from  reserve  and  suspense  accounts  having  but 
one  item  each  month  for  each  account  do  not  need  a 
a  larger  space  such  as  is  given  to  those  accounts  having 
a  number  of  entries;  hence  they  are  ** bunched." 

Under  the  heading  '' Summaries — Manufacturing  and 


320  Factory  Accounting 

Administrative"  are  listed  all  the  totals  in  the  various 
distributing  accounts;  below  this  is  a  grand  total  which 
is  made  up  of  the  following: 

Reserves  for  Maintenance,  etc $  9,584.25 

Reserves  for  Depreciation  2,407.00 

Items  from  Suspense 355.00 

Administrative  Summary    3,224.41 

Manufacturing    Summary 12,731.30 

$28,301.96 


By  referring  to  General  Exhibit,  folio  3  (Figure  15), 
line  25,  it  may  be  seen  that  this  amount  is  in  exact  articu- 
lation with  the  ** Accruing  Manufacturing  Expense" 
column. 

The  various  entries  on  the  Expense  Analysis  were 
collated  from  different  sources.  In  posting  the  items 
from  the  various  sources  it  is  a  help  to  use  a  different 
colored  ink  for  the  postings  from  each  book  of  original 
entry,  and  if  the  analysis  sheet  is  out  of  accord  with  the 
controlling  record,  the  postings  from  one  book  at  a  time 
can  be  reconciled  until  the  error  is  located. 

The  following  list  represents  the  source  and  the 
amounts  of  all  items  analyzed  on  the  Expense  Analysis 
Sheet.  Some  items  are  purely  hypothetical,  and  some 
are  taken  from  existing  forms  as  indicated. 

Expense  Analysis 

Exhibit,  folio  2,  line  6  ( Hypothetical ) 

Check  Register,  sheet  1        101 $  12.75 

102 9.35 

104 18.07 

110 6.95 

115 5.25 

189 15.00 

190 1.77                         $       69.14 


Expense  Analysis 

Exhibit,  folio  2,  line 9  (See  Figure  19) 

Purchase  Analysis,               103 $  3.80 

sheet  14                              137 1.65 

145 9.27 

182 50.00 

184 3.40 

186 75.00 

187 9.50 

141 109.25 

130 26.90 

136 3.50 

(Hypothetical) 

114 $  292.50 

115 275.00 

116 237.50 

117 275.00 

118 298.50 

119 162.75 

120 76.40 

121 , 92.50 

122 210.40 

123 240.25 

124 316.12 

125 160.00 

126 290.00 

Exhibit, folio 2, line  11  (See  Figure  17) 

Check  Register,  sheet  3         111 $  500.00 

112 615.00 

113 365.00 

180 900.00 

181 433.00 

139 50.00 

186 100.00 

138 6.00 

187 250.00 

Exhibit,  folio  2,  pencil  footings  under  line  21 
Exhibit,  folio  2,  line  22  ( See  Figure  80 ) 

Labor  Cost  Summary,          114 $  176.25 

sheet  19                               115 167.50 

116 115.10 

117 140.25 

21 


321 


$    292.27 


2,926.92         3,219.19 


3,219.00 


$  6,507.33 


322  Factory  Accounting 


118 186.90 

119 85.25 

120 43.25 

121 45.10 

122 108.20 

123 120.19 

124 149.91 

125 90.75 

126 116.70                            1,545.35 


Exhibit,  folio  2,  line  26  ( See  Figure  16 ) 

Cash  Receipts,  sheet  3  188 $    500.00 


216.. Cr.^  .30.. 

223.. Cr.    S.75..  4.05  495.95 


Exhibit,  folio  2,  line  28 

(See  Figure 

47) 

Material  Cost  Summary 
page  16 

112 

$ 

12.40 

' 

112 

3.75 

118 

92.95 

119 

8.45 

120 

164.19 

121 

210.70 

122 

140.90 

128 

190.25 

138 

42.70 

150 

28.40 

151 

32.69 

152 

it  bottom  of  CO. 

34.76 

962.14 

Exhibit,  folio  2,  footing  i 
Exhibit,  folio  3,  line  5 

liimn 

$9,510.77 

{ Hypothetical ) 

Purchase  Analysis, 

101 

...$ 

68.40 

sheet  15 

102 

104 

110 

112 

18.45 
64.80 
16.20 
14.25 
16.20 
235.80  ■ 
80.45 

114 

• 

115 

116 

117 

1.90 

118 

193.H1 

119 

16.84 
16.45 

124 

131 

225.00 

Purchase  Analysis, 
sheet  16 


Purchase  Analysis, 
sheet  17 


Exhibit,  folio  3,  line  6 
Return  Purchase,  sheet  19 


Expense  Analysis 

132 64.28 

133 529.94 

182 $  50.00 

183 318.75 

187 75.00 

188 128.92 

189 125.00 

190 60.75 

191 28.32 

101 8.40 

103 90.75 

104 20.90 

110 12.75 

112... 17.40 

113 28.70 

115 12.40 

116 21.90 

117 18.16 

118 2.80 

134 375.00 

136 12.80 

137 28.19 

115 $1,290.25 

116 116.50 

124 120.90 

137 119.80 

138 28.90 

139 240.00 

150 625.00 

151 147.19 

151 260.18 

152 14.60 

152 16.09 

152 168.09 

184 68.15 

184 31.85 

( Hypothetical ) 

115 $  128.40 

124 61.24 

137 60.20 


323 


1,562.80 


1,436.89 


3,247.50    6,247.19 


Gr.  249.84 


/ 


324  Factory  Accounting 

Exhibit,  folio  3,  line  7  ( Hypothetical ) 

Material  Summary,  136 $     62.10 

sheet  23  137 65.09  127.19 

Exhibit,  folio  3,  line  9  '         (Hypothetical) 
Production  Register, 

sheet  95  140 $    172:80 

Production  Register, 

sheet  96  140 147.60  320.40 

Exhibit,  folio  3,  lines  10  to  21  inclusive, 
original  entries 

Suspense  Items ." $    355.00 

Maintenance,  etc 9,584.25 

Depreciation 2,407.00       12,346.25 


See  Figure  15,  line  25  $28,301.96 


COMMEECIAL   CoSTS 

The  commercial  costs  on  the  Expense  Analysis  (Fig- 
ure 83)  are  summarized  as  follows: 

Periodical  Apportionments $  1,259.75 

Commercial   Summary    11,366.18 

Apportionment  from  the  Expense  Distribution  Sheet 3,060.82 


$16,286.75 


By  referring  to  Figure  15,  line  26,  it  may  be  seen 
that  the  total  amount  is  in  exact  articulation  with  the 
total  of  the  ''Commercial  Cost"  column.  The  items 
which  go  to  make  up  this  summary  are  shown  in  the 
following  tabulation.  Inasmuch  as  all  commercial  costs 
are  in  the  700  group,  it  is  not  necessary  to  show  more 
than  the  units  and  items  of  the  number  when  used  in 
the  commercial  costs  columns. 


Expense  Analysis  325 

Exhibit,  folio  2,  line  2,  original  entry  704 $  .90 

"      5,       "  "       704 .65 

"      9,    (See  Figure  16) 

Purchase  Analysis,  sheet  14  702 $  50.00 

710 92.50 

712 219.20 

710 215.00 

710 68.50      $645.20 

Exhibit,  folio  2,  line  11   (See  Figure  17) 

Check  Kegister,  sheet  3,  original  entry  700 $  627.19 

Exhibit,  folio  2,  line  13,  original  entry  712 127.19 

"     15,       "             »       704 1.40 

"     21,       "             "       705 Cr.  .92 

"         "           pencil  footings  under  line  21 $  1,401.61 

"         "           line  22,  original  entry  704 1.65 

"             "     26,   (See  Figure  16)   712 44.81 

Cash  Receipts,  sheet  3 — discount  column  704 226.09 

Exhibit,  folio  2,  line  27,  original  entry  704 .20 

"     29  (hypothetical) 

Cash  Receipts,  sheet  4 — discount  column  704 142.12 

Exhibit,  folio  2,  footing  at  bottom  of  column $  1,816.48 

Exhibit,  folio  3,  line  5   (hypothetical) 

Purchase  Summary,  sheet  18  708 $500.00 

710 315.68 

708 250.00 

714 16.25 

708 192.40 

712 328.90 

702 17.25 

714 36.32 

708 250.00     1,906.80 

Exhibit,  folio  3,  line  12,  original  entry,  suspense 500.00 

"     23,         "         "         reserve    759.75 

"         "  "24,         "         "         700  7,642.90 

$12,625.93 
Transferred  from  Expense  Distribution   (Figure  84) 3,660.82 

See  Figure  15,  line  26 $16,286.75 


326  Factory  Accounting 

Departmentaii  Distribution  of  Expense 

Manufacturing  expense  is  first  segregated  under  its 
various  headings  as  lias  been  previously  described.  When 
this  is  done,  the  amount  under  each  heading  is  dis- 
tributed in  proper  proportion  over  the  departments  to 
which  it  belongs.  This  is  readily  accomplished  by  means 
of  the  distribution  sheet  shown  in  Figure  84.  In  prac- 
tice such  a  form  is  ruled  with  such  number  of  columns 
as  may  be  necessary  for  the  particular  establishment 
or  distribution. 

The  first  column  of  the  distribution  sheet  (''Suspense 
and  Eeserve — Cr.")  shows  the  various  items  of- suspense 
and  reserve  and  agrees  with  the  following  totals  in 
Figure  83: 

Reserve  for  Maintenance $  9,584.25 

Reserve  for  Depreciation 2,407.00 

Items  from  Suspense 355.00 

$12,346.25 


The  second  column  of  the  distribution  sheet  (''Manu- 
facturing Expense  Analysis — Cr.")  shows  the  totals  of 
the  various  expense  items  to  be  distributed  and  agrees 
with  the  following  totals  in  Figure  83 : 

Administrative   $  3,224.41 

Manufacturing    12,731.30 


$15,955.71 


The  grand  total  of  these  two  summaries  equals 
$28,301.96,  as  may  be  seen  in  both  Figures  83  and  84: 

The  other  columns  are  debit  columns  and  embrace  a 
group  of  accounting  classifications  as  follows: 


Expense  Analysis  327 

Suspense  Debit. 
Reserve  Debit. 
Assets  Debit. 
Commercial   Costs   Debit. 

Also  tliere  are  columns  for  direct  producing  depart- 
ments 1  to  4  inclusive  and  indirect  producing  depart- 
ments 10  to  19  inclusive.  As  the  items  of  expense  are 
distributed,  the  amount  belonging  to  each  department  or 
group  of  accounts  is  entered  in  the  column  designated. 
The  amounts  entered  in  the  various  debit  columns  must, 
of  course,  equal  the  total  of  the  two  credit  columns,  and 
no  permanent  entries  or  applications  of  the  figures  of  the 
distribution  sheet  should  be  made  until  the  accuracy 
of  the  distribution  has  been  proved. 

The  basis  of  distribution  between  departments  must 
necessarily  differ  according  to  the  nature  of  the  expense 
classification  employed.  In  Groups  E  and  F  of  Figure 
9  a  list  of  the  usual  expense  items  will  be  found.  This 
list  is  general  and  without  specific  reference  to  any  given 
line  or  class  of  product.  If  this  list  were  to  be  used  in 
any  particular  factoiy,  specific  items  of  expense  peculiar 
to  that  factory  would  be  added  or  may  be  substituted  for 
other  items  in  Group  E  or  F  having  similar  character- 
istics but  not  found  in  the  particular  business. 

Items  1  to  19  of  Group  E  are  for  direct  charges  to 
direct  and  indirect  producing  departments,  i.  e.,  charges 
arising  in  such  departments  and  not  applying  in  any 
way  to  other  departments  and,  therefore,  needing  no 
further  departmental  segregation. 

Items  20  to  62  of  Group  E  are  for  various  items  of 
expense  applicable  in  a  greater  or  less  degree  to  the 
direct  and  indirect  producing  departments.  At  this 
point  is   the   crux   of  the   cost   finding   search.     Each 


328  Factory  Accounting 

department  should  be  charged  with  exactly  what  it  gets 
or  receives  benefit  from — no  more — no  less.  In  practice 
each  of  these  various  classes  of  expense  is  carefully  con- 
sidered, and  a  ''key  chart"  is  filled  out  for  use  perhaps 
for  the  entire  fiscal  year.  These  are  changed  from  time 
to  time  if  actual  physical  conditions  change.  The  vari- 
ous angles  to  be  considered  in  the  matter  when  a  ''key" 
is  first  being  prepared  makes  it  quite  difficult  of  accurate 
determination  unless  deep  thought  and  concentration 
are  applied.  The  Expense  Account  has  been  in  other 
years,  and  unfortunately  still  is  to  a  too  great  extent, 
one  of  those  general  accounts  which  are  abused  and  util- 
ized as  dumps  for  inefficiency  or  indifference,  and  which, 
therefore,  need  frequent  and  careful  scrutiny. 

There  is  no  fixed  single  standard  of  segregation  for 
all  items  alike,  and  each  must  be  treated  on  the  most 
logical  basis  that  may  be  evolved.  Rent  or  its  equivalent 
is  distributed  over  the  various  departments  on  the 
basis  of  space  occupied.  When  power  is  purchased, 
its  cost  is  distributed  equitably  on  the  basis  of  horse 
power  used  by  each  department.  When  power  is  gen- 
erated, the  power  plant  is  preferably  treated  as  a  sep- 
arate and  distinct  department,  to  be  diffused  as  a  whole 
by  horse-power  units.  If  gas  or  electric  current  is  pur- 
chased for  lighting  purposes,  the  charge  is  spread  over 
departments  on  a  basis  of  benefits  derived.  In  cases 
where  the  factory  generates  its  own  electric  current,  the 
cost  of  lighting,  as  accurately  as  can  be  ascertained,  will 
be  separated  from  that  of  power  and  spread  over  the 
various  departments,  as  in  the  case  of  current  pur- 
chased. Taxes  and  insurance  are  spread  on  the  basis 
of  amounts  invested  in  the  various  departments.  And 
thus  each  class  of  expense  is  judged  squarely  upon  its 
own  standards. 


l- 

it 
it 

y 

i- 
le 
)e 
}d 
it. 
)ii 
es 
he 
)r, 
es 


1.92 
2.77 
5.61 
1.03 
2.51 

3.84 


i2.24 
6.97 
10.45 
38.31 
31.35 

48.30 


Fio.  8S.— Expense  Aimlyt 


o 


O 


Expense  Analysis  329 

The  following  list  shows  the  basis  used  for  distribu- 
tion of  the  items  20  to  62.  It  may  be  noticed  that 
charges  are  made  to  reserve  accounts  which  may  at  first 
seem  confusing.  The  reserve  items  which  are  actually 
absorbed  into  costs  are  those  like  ''maintenance  of  build- 
ings" (50);  this  is  an  anticipated  cost,  and  when  the 
actual  cost,  or  any  part  of  it,  is  incurred,  it  must  not  be 
again  absorbed  in  expense,  but  it  should  be  charged 
against  that  credit  which  has  been  set  up  to  receive  it. 
Here  is  another  reason  for  summarizing  reserves  on 
Figures  83  and  84.  As  all  actual  expense  expenditures 
whether  direct  or  against  reserves,  are  put  through  the 
Manufacturing  Expense  Account,  it  is  a  simple  matter, 
for  statistical  purposes,  to  arrive  at  actual  expenditures 
by  deducting  the  total  of  the  reserve  summary. 


Expense  Disteibution 


120  Carpenters 

Reserve  for  Maintenance  of  Buildings 50%  =  $141.92 

Dept.   1 4.5  —      12.77 

"      2 5.5=      15.61 

"       3 21.5  =      61.03 

"       4 18.5=      52.51 

100%  =  $283.84 

121  Painters 

Maintenance  of  Buildings 60%  =  $208.98 

"  "    Equipment    15      =      52.24 

Dept.  1 2      =        6.97 

"      2 3      =      10.45 

"      3 11      z=      38.31 

'*      4 9      =      31.35 


100%  =  $348.30 


330  Factory  Accounting 

122  Millwrights 

Maintenance  of  Buildings 5%  —  $  22.98 

»  Machinery   60      =    275.70 

"  Equipment 35      =    160.82 


100%  =  $459.50 

123  Porters  and  Messengers 

Commercial 5%  =:  $  17.84 

Dept.   1 8.5  =      30.32 

"      2 19      =      67.77 

"       3 22.5=      80.25 

"       4 15      =      53.50 

"     10 3      =      10.70 

"     11 5      rr      17.84 

»     13 2      =        7.13 

"     14 6      =      21.40 

»     15 3      z=      10.70 

"     16 2      =        7.14 

"     17 3      z=z      10.70 

"     18 3      1=1      10.70 

"     19 3      =      10.70 

y  100%  =  $356.69 

124  Local  Transport 

Commercial    5%,  =  $  27.12 

Dept.   1 16      =      86.75 

"      2 9      =      48.79 

"       3 31.5  =    170.75 

"       4 16.5=      89.46 

"     14 9      =      48.79 

"     15 ' 8      =      43.36 

"     19 5      =      27.12 

100%  =  $542.14 

125  Elevator  Men 

Commercial    5%  =  $  12.54 

Dept.  1 3.5  =        8.78 

"       2 18      =      45.14 

»       3 19.6  =      49.15 

"       4 21.5=      53.91 

»     11 2      =        5.01 

»     12 3.5  =        8.78 


2      = 

5.01 

6.5  = 

16.30 

3      = 

7.52 

4      = 

10.03 

3      = 

7.52 

8.4  = 

21.06 

Expense  Analysis  331 

Dept.  13 2      = 

"     14 

"     16 

"     17 

"     18 

"     19 

100%  =  $250.75 

126  Electricians 

Reserves    (562-152 ) 24% 

Commercial    3 

Dept.   1 6 

2 

3 

4 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

100%  =:  $596.95 

130  Water  (For  boiler,  sprinkling,  drinking,  and  washing) 

Dept.   10 25%  =  $     6.72 

"       15 75      =      20.18 


24%  = 

$143.26 

3      = 

17.91 

6      = 

35.82 

9      = 

53.r3 

27      = 

161.17 

8      =z 

47.76 

3      z= 

17.91 

1      = 

5.97 

2      = 

11.94 

1      = 

5.97 

2      = 

11.94 

2      = 

11.94 

4.5  =z 

26.86 

1      = 

5.97 

4.5  — 

26.86 

2      = 

11.94 

100%  =  $  26.90 


131  Heat 

Commercial    8% 

Dept.   1 6 

"       2 

"       3 

"       4 

"     11 

"     12 

»     13 

"     14 


8%  =5 

!  18.00 

6      = 

13.50 

9      = 

20.25 

24      = 

54.00 

20.5  = 

46.13 

2      = 

4.50 

3      = 

6.75 

3      = 

6.75 

4.5  = 

10.12 

332  Factory  Accounting 


Dept.  15 3  =  6.75 

"     16 5  =  11.25 

"     17 3  =  6.75 

"     18 5  =  11.25 

"     19 4  =  9.00 


100%  =  $225.00 


132  Light  (By  count  of  lamps  used) 

Commercial    7%  =  $     4.50 

Dept.  1 5.5  =  3.54 

2 11      =  7.07 

3 18.5  z=  11.89 

4 15      =  9.64 

10 5.5  =z  3.54 

11 2      =  1.28 

12 3      =  1.93 

13 2      =  1.28 

14 8      =  5.14 

15 2      =:  1.29 

16 4      =  2.57 

17 3      =  1.93 

18 6.5=  4.18 

19 7      =  4.50 


100%  =  $  64.28 


133  Taxes 
Dept.  1. 

2. 

3. 

4. 
10. 
14. 
15. 
16. 
18. 


10%  = 

$  65.00 

15      = 

97.50 

20      = 

130.00 

5      = 

32.50 

30      = 

195.00 

8      = 

52.00 

8      = 

52.00 

2      = 

13.00 

2      = 

13.00 

100%  =  $650.00 


134  Insurance 

Dept.  1 . .  . 

"      2... 


3. 

4. 
10. 


9%  =  ^ 

5  16.20 

7.5  = 

13.50 

10      = 

18.00 

3.5  = 

B.30 

40      = 

72.00 

Expense  Analysis  333 


Dept.  14. 
"     15. 

"  16. 
"  18. 
"     19. 


2. 

3. 

4. 
10. 
14. 
15. 
16. 
18. 
19. 


136  Oil  and  Waste 

Dept.  1 

2 

3 

4 

15 

18 

19 


3. 

4. 
15. 
16. 
18. 
19. 


10  :zz  18.00 

8  =  14.40 

4  =  7.20 

5  =  9.00 
3  z=  5.40 


100%  =  $180.00 


135  Interest  ■    - 

Commercial ,o^ 

Dept.    1...  18%  =  $U58.17 

^                 7.5  =  482.56 

6.5=  418.23 

10      =  643.43 

4      =  257.37 

26      =  1,672.90 

8.5  =  546.91 

11      =  707.77 

■ 3      =  193.03 

3.5  =  225.19 

2      =  128.69 


100%  =  $6,434.25 


137  Factory  Supplies 

^r-^:;;;;;:;;; 11% 


8% 

= 

$     6.27 

22 

= 

17.25 

31 

= 

24.30 

27 

:z: 

21.17 

5 

=: 

3.92 

3 

=z 

2.35 

4 



3.14 

100% 

$  78.40 

11% 

^ 

$  21.69 

20 

== 

39.45 

30 

Z3 

59.17 

25 

= 

49.30 

4 

:= 

7.89 

4 

r^ 

7.89 

4 

= 

7.89 

2 

= 

3.95 

100%  =$197.23 


334  Factory  Accounting 

138  Technical  Library 

Commercial    17%  =  $     5.93 

Dept.   1 5  _  1.74 

"      2 10  =  3.49 

"       3 18  =  6.28 

"       4 14  —  4.89 

"     11 5  =  1.74 

"     12 10  =  3.49 

"     13 2  =  .70 

"     14 3  =  1.05 

"     15 3  =  1.05 

"     16 3  =  1.05 

"     17 3  =  1.05 

"     18 5  =  1.74 

"     19 2  =  .70 

100%  =  $  34.90 

139  Association  Costs 

Commercial    15%  =  $  43.50 

Dept.   1 7  =  20.30 

"      2 11  —  31.90 

"       3 15  =  43.50 

"       4 12  =:  34.80 

"     11 10  =  29.00 

"     12 10  =  29.00 

"     13 8  =  23.20 

"     14 2  =  5.80 

"     15 2  =1  5.80 

"     16 2  =  5.80 

"     17 2  =  5.80 

"     18 2  =z  5.80 

"     19 2  :=  5.80 

100%  =  $290.00 

140  Experimental  Work 

Commercial    50%  =  $250.00 

Dept.   1 5  =  25.00 

"       2 11  —  55.00 

"       3 22  =z  110.00 

"       4 12  =  60.00 


100%  =  $500.00- 


Expense  Analysis  335 

141  Incoming  Transportation 

Commercial    26%  =  $  27.31 

Dept.  13 10      —      TD.QS 

"      14 65      =      71.01 


100%  =  $109.25 


142  Over,  Short  &  Damage 

Dept.   1 10%  =  $  25.00 

2 

3 

4 

16 

18 

100%  =  $250.00 


20 

=      50.00 

45 

=    112.50 

15 

=      37.50 

5 

=      12.50 

5 

=      12.50 

143  Variation  of  Weights  and  Measures 

All  to  Dept.   14 100%  =  $250.00 

144  Factor  of  Safety 

Dept.    1 

"       2 


8.3% 

= 

$  41.50 

22.3 

= 

111.50 

41.6 

— 

208.00 

27.8 

= 

139.00 

100%  =  $500.00 


145  Miscellaneous 

Dept.   1 y. 10%  =  $  .93 

"      2 20      =  1.85 

"       3 40      =  3.71 

"      4 30      =  2.78 


100%  =  $     9.27 


150  Maintenance  of  Buildings 

All  to  Dept.   10 100%  =  $200.00 

151  Maintenance  of  Machinery 

Dept.   1 15% 

»      2 

»      3 

"      4 

"     15 

"     16 


15% 

=1 

$  75.00 

16 

— 

80.00 

30 

rz: 

150.00 

8 

= 

40.00 

20 

— 

100.00 

4 

= 

20.00 

336  Factory  Accounting 


Dept.  18 5      =      25.00 

"     19 2      =      10.00 


100%  =  $500.00 


152  Maintenance  of  Equipment 

Commercial    8% 

Dept.   1 15 

"      2 

"      3 

"      4 

"     10 

"     14 

"     15 

"     16 

"     18 

"     19 


8%  = 

$  24.00 

15      z= 

45.00 

15      = 

45.00 

20      = 

60.00 

5      = 

15.00 

9      = 

27.00 

5      = 

15.00 

8      = 

24.00 

5      = 

15.00 

5      = 

15.00 

5      = 

15.00 

100%  =  $300.00 


160  Depreciation  of  Buildings 

All  to  Dept.  10 100%  =  $500.00 

161  Depreciation  of  Machinery 

Dept.   1 

2 

3 

4 

15 

16 

18 

19 , 


15% 

== 

$187.50 

16 

= 

200.00 

30 

= 

375.00 

8 

— 

100.00 

20 

— 

250.00 

4 

= 

50.00 

5 

— 

62.50 

2 

= 

25.00 

100%— $1,250.00 


162  Depreciation  of  Equipment 

Commercial  8%  z=$  52.56 

Dept.   1 

2 

3 

4 

10 

14 

15 

16 


15 

— 

98.55 

15 

= 

98.55 

20 

— 

131.40 

5 

^ 

32.85 

9 

3Z 

59.13 

5 

— 

32.85 

8 

— 

52.56 

5 

== 

32.85 

Expense  Analysis  337 

Dept.  18 5      _      32.85 

"     19 5      =      32.85 


100%  =  $657.00 


Administrative  Costs 


No  business  can  succeed  without  an  executive  organiza- 
tion, and  the  measure  of  its  success  is  largely  determined 
by  the  ability  of  its  executive  force.  The  costs  of  this 
executive  organization  come  under  the  head  of  pro  rata 
expenses,  i.  e.,  items  of  cost  which  enter  into  both  the 
manufacturing  and  commercial  ends  of  the  business.  At 
times  the  administrative  costs  belonging  to  the  two 
classes  are  readily  differentiated,  and  when  this  is  the 
case,  the  accounts  capable  of  this  closer  classification 
may  be  eliminated  from  the  pro  rata  group. 

Local  conditions  must  govern  the  division  of  admin- 
istrative expense  as  between  manufacturing  and  selling. 
When  the  factory  plant  is  entirely  separated  from  the 
general  office  or  coromercial  headquarters  and  when  the 
concern  maintains  a  factory  office  with  its  own  separate 
organization,  then  the  prorating  operation  is  a  clean- 
cut  one.  A^Tiere  the  business  is  largely  run  from  one 
general  office,  the  division  is  not  so  simple  and  is  to  be 
determined  by  good  judgment  and  local  conditions.  As 
a  rule,  the  largest  part  of  executive  costs  is  commer- 
cial and  not  properly  chargeable  to  production  costs. 

Executive  costs  which  properly  belong  to  production 
are  spread  over  departments  on  the  basis  of  hours  in 
each  department  as  compared  with  the  total  hours  in 
the  plant  or  any  equitable  plan  which  seems  fitting  in  the 
individual  case. 

Following  is  the  list  of  percentages  used  in  connection 
with  Figure  84 : 

22 


338  Factory  Accounting 

Proportion  of  Administrative  (80-91) 

Suspense    •   $   103.40 

Commercial  50%  =: 

Dept.    1 


2. 

3. 

4. 
10. 
11. 
12. 
13. 
14. 
15. 
16. 
17. 
18. 
19. 


50% 

— 

1,648.00 

3 

HZ 

98.88 

5 

z= 

164.80 

8.5 

— 

280.17 

6.5 

= 

214.24 

2.5 

— 

82.40 

4 

— 

131.84 

3 

= 

98.88 

5 

— 

164.80 

2 

= 

65.92 

2.5 

— 

82.40 

2 

=: 

65.92 

2 

— 

65.92 

3 

— 

98.88 

1 

— 

32.96 

100% 

$3,296.01 

Indirect  Producing  Departments 

When  all  items  of  expense  hate  been  allocated  to 
departments,  then  the  cost  of  the  indirect  production 
departments  must  be  absorbed  into  production  through 
the  direct  production  departments.  The  same  general 
rules  apply  to  this  formality  as  though  the  several  items 
involved  were  purchased  outside  the  plant  and  are, 
therefore,  handled  as  described  under  the  heading 
** Departmental  Distribution  of  Expense"  (page  326), 
save  only  that  distribution  is  confined  to  the  direct 
production  departments.  The  percentage  will  be  made 
as  close  to  actual  facts  as  may  be  determined. 

Following  is  a  list  showing  the  distribution  as  carried 
out  on  Figure  84: 

110  Plant  Factor,  $2,883.20 

Dept.    1 9%  =  $    259.49 


Expense  Analysis  339 

Dept.    2 ..11      —  317.15 

3 43      zz=    1,239.78 

"       4 ■ 37      =    1,066.78 

100%  =  $2,883.20 

111  Works  Management,  $714.58 

Dept.   1 8.3%  —  $  59.31 

"       2 22.3      =  159.35 

"       3 41.6      =  297.26 

"      4 27.8      —  198.66 

100    %  =  $  714.58 

112  Engineering,  $806.17 

Commercial  40%  =  $  322.47 

Dept.    1 20      =  161.23 

"       2 10      =1  80.62 

3 20      =  161.23 

"        4 10      =  80.62 

100%  =z$  806.17 

113  Purchasing,  $619.47 

Commercial  5%  =  $  30.97 

Dept.    1 30      =  185.84 

2 15      =  92.92 

"       3 40      =  247.79 

"       4 10      =  61.97 

100%  =  $  619.47 

114  Stores  and  Stocks,  $1,657.18 

Dept.    1 20%  =  $  331.44 

2 15      =  248.57 

3 45      =  745.73 

»       4 20      =  331.44 

100%  =  $1,657.18 

115  Power,  $3,253.81 

Dept.    1 5%=$  162.69 

2 22      =  715.84 

3 55      =    1,789.60 

"       4 5      =  162.69 


348  Factory  Accounting 

Dept.  16 5      =       162.69 

"     18 5      =       162.69 

"      19 3      =         97.61 

100%  =  $3,253.81 

116  Patterns,  $1,213.42 

Reserve  for  Maintenance   (562-152) 30%  =  $    364.03 

Assets     70      =:       849.39 

100%  =  $1,213.42 

117  Time  and  Cost,  $543.46 

Dept.    1 10%  =  $  54.35 

2 15      =  81.52 

3 55      =  298.90 

4 20      =  108.69 

100%  =  $    543.46 

118  Tool  Making  &  Repairing,   $1,509.89 

Reserve  for  Maintenance   (562-152) 40%  =  $    905.93 

Assets    60      =       603.96 

100%  =  $1,509.89 

119  Test  and  Inspection,  $718.71 

Dept.    1 5%  =  $  35.93 

2 15      =  107.81 

»       3 20      =  143.74 

"       4 60      =  431.23 

100%=:$    718.71 

Closing   Entries 

When  all  the  transfers  a^  described  have  been  duly 
performed,  the  overhead  will  have  been  focused  down 
to  eight  items  as  shown  in  the  following  list  and  as  may 
be  found  in  Figure  84.  These  items  are  duly  trans- 
ferred to  the  closing  folio  of  the  General  Exhibit  (Fig- 
ure 15)  on  line  25. 


o 


EXPENSE  DISTRIBUTION,  Month  ^f^^fe^^^  19/,^ 

1  Suapcf-se 

AnaV'o 

— 

cu.,„.„„„       - 

3p«nse     Rt 

oT' 

sr*.i  * 

iJr 

^ 

r' 

1 

2              3              4 

£1: 

jm.1 

f«jm„r- 

,„3 

13 

.~JSr.ik    ''°" 

16           IT 

.  '3 

IS 

p,ct,.n 

i     III 

t 

M. 

DIRECT  CHARGES 

ft5 

Sfei 

irawii 

^i 

?^.iigg^ 

li^ 

*! 

^e 

M 

9£LHi 

?0  si 

itsatmL 

3;(B  J 

f     iJ-1 

n 

fx 

?o 

Carpenters 

11 11- 

'■11 

?( 

?0 

?l 

Pa.r.Icra 

_. 

'.'■'Kh 

'11 

i&.MjiJL&L 

k. 

ts 

^0 

22 

MillwrigMs 

\s\o 

'I'f 

?? 

M 

2i 

Porr«r*  and  Messengers 

to  ST 

'ih 

^A^A  mnnim-LS 

"BjItoI 

/,^l 

iS-f 

iiU>     i: 

JO 

'» 

2d. 

nU 

n 

^h-n  W*iF 

-^TT 

! 

kii 

'J$     I. 

(. 

25 

7[Sit 

H-lsl  m'll  Ms 

"hH 

ol 

hi 

(to, 

■':} 

•)\ 

26 

-<,,-.■; 

nhi 

i^him.2r, 

H'h 

» Ul 

I 

9f 

i'?1 

9^ 

Xi 

««  M  ?«^  t^d 

:e8<^ 

r     J4 

"^ 

fp 

30 

WaTtr 

.« 

1 

sJ^J 

\-M 

1 

t-t 

31 

Me»T 

[ 

I  00 

1 

ssqTiloksl  IsMoo 

It 

,^ 

' 

■  fo 

if-j 

+1.V 

M  1  ^ 

Ir'J 

'iS 

l'"^ 

f(li  ^ 

OO 

vX 

,^? 

H,9o 

^•mi 

hm 

1  **? 

»;v 

"■^H 

OX 

?'■ 

;» 

**ll !  1/ 

iSj, 

■?' 

i  IS 

Ss. 

!! 

yj 

1" 

31 

■ 

I '-fit 

r 

■.'.oa    rhtrol/ 

lilTp 

Jisfedl- 

Ooll    l5b 

It 

ii 

no 

34 

Insurance                        3 

££lq 

kkn 

4.0 

i"' 

.    «o 

M 

J.^ 

,15 

■ 

itssIZ^ 

tf  1 2  s^.  4 /l?li3Kky  V-J 

7! 

^T 

f'! 

S    l^dbkh 

U  i  flil»-5l   1 

iiliS  1 

!  y. 

>ki 

3e 

Oil  andVVaslt 

hk,J     kU3o 

? 

n 

' 

^ 

lU 

,   ,« 

37 

, 

1 

lil  .#*d_WT 

( 

X 

l 

J<? 

;?? 

l.m 

.   &S- 

39 

.fJ3 

ijS 

Wot 

k7« 

flW 

'1" 

'h 

OS     IroiiJ 

I  ok 

OS 

\     i-iv 

?i 

Aisociilion   Costs        ' 

, 

=L  ,3,H  H^° 

? 

(f*" 

;f,o 

7?u; 

. 

sISoll  1  \S 

Ito 

5  so 

Sal      'Sc 

fo 

■n 

)i 

E^ptrimenTal  work 

l3!££ 

iS3  00 

;oo    5kKc  I 

ooo 

1, 

1 

i.f 

1-1 

ishj 

or  i 

(■i 

4? 

iSfeol  IstelocL 

Wo 

1 

>?"r. 

iSh 

nsb 

43 

Var.a1.onof  Wts&Meas 

2     Joolli 

^(1 

4+ 

![. 

iTp   ( 

LiSh  iMoo 

/,  I  j\oo 

4=; 

ii 

(£5 

'7 ' 

1" 

' 

pn 

;<; 

So 

£5ie 

7r 

oo 

'.0 

r)C 

A 

liaa 

/    oo 

li 

Ml 

r„ 

,r(l.n 

/ 

lU 

,n 

00     zi 

(Sbo 

iSae 

<n 

oo 

60 

<;;• 

iS 

Jff,kolt2 

2S3 

00     (WooL 

.:! 

ro 

I  na  _ 

'.< 

or 

£t,u'orr„^r 

■  JlIsc- 

fH 

tUo 

if<r 

,! 

M 

SJr     5! 

St. 

jify 

-?J 

ss 

J  ?f 

I| 

Adm.o.sTrar.ve                   ( 

}iQ 

f   .ploo 

7 

tol 

.«So    2 

gj,. 

2rhu 

sMihW'^ 

ffS 

^f; 

Jo 

3i     S2 

6?Ii_ 

^  ti-M 

rs 

!    ft 

lO 

Pldnt  Factor 

""' 

1" 

JMflk 

isfcan 

i» 

'^f 

"1 

r 



1  1 

Works  Maniflement 

!fl|3'llkft|35|UWi'' 

'f 

U 

n 

fSX 



b^     ^(.lll 

n'M 

13 

Purchaslno 

0  on 

oU.^ 

— 

1 

. 

,, 

Stores  andSToCki 



-14 

i^raiffikass 

^' 

'< 

M 

1 

lA 

Powar 

HsiKWio 

!'■ 

'•1 

;;  CTiifehk.,! 

i--i, 

'■J 

I   6-  _ 

16 

PaTTern 

3 

tf  03 

«VO  P«hl3<? 

rr 

I 

/!M 

17 

Time  ar%dCoiT 

(J,rll  H/lrzlkMd<?o 

-■       J 

»  « 

"       -f 

0?f? 

Jr?6 

r 

r 

^n 

'<r 

_ 

r 

ji&ntT 

■ttrrfr 

.    J^ 

,, , 

^  -, 

!    Ill 

J    " 

"T 



-j — 





^  Wir 

_ .  1_ 

1 

^" 

■" 



-} — 





-  ■ 

- 

-f 

-    — 

— 



'■ 

= 

1    5i 

J^ 

r- 

Tof^/^           U 

ii&n 

U2i 

=  sik 

3fcfo|gl 

Ei 

MU 

.,,fi, 

sia 

S!3 

13 

:.= 

=: 

- 

-■ 

' 

_.. 

--. 

:     ::: 

o 


Fio.  84. — Expense  Distribution 


r 


Expense  Analysis  341 

Expense  Distribution 

Suspense    $  478.40  .018 

Reserves    4,453.20  ,157 

Assets    1,453.35  .051 

Commercial    3,660.82  .129 

Dept.   1 2,749.40  .097 

"       2 3,528.41  .125 

"      3 8,000.59  .283 

"      4 3,977.79  .14 


$28,301.96  100% 


INDEX 


Accommodation  checks,  118 
Active  assets,  58,  72-75 
Administrative  costs,   337-38 
Analysis 

of  a  business,  60-61 

of  expense,   317-41,  insert   between 
328   and  329 

of  organization,   1-12 

of  purchases,  86,  136-37.  146-51 

of  subsidiary  records,  130-33 
Analytic  manufacturing,  227-29 
Antecedent    assembling    preparation, 

229-33 
Articulation,   46-47 
Assembling  industry,  224,  229-37 
Assets 

active,  58,  72-75 

fixed,   59.   77 

intangible,  59 

liquid,  4,  58 

material,   238-39 

passive,  58-59,   75-77 

representative,  59,  77 

Bags,  in  block  system,  215-17 

Balance  sheet,   67-71 

Balance  Sheet  Ledger.     See  General 

Exhibit. 
Bank  accounts,  121,  123-25.  133-40 
Bill  of  material,  174,  266 
Block  system,   124,   214-17 
Bonds,    59-60 
Bonus  earnings,  295-98 
Budget  system,   217-21 
Burden.      See   Expense. 
By-products,   225-26,   228-29 

Capital  liabilities,  60 
Cash 

Account,  115-40 

current,   81-83 

Importance  of,  4 

Journal.     See   General  Exhibit. 

Receipts  Sheets,  insert  between  78 

and    79,    119,   122-33,   135 
the  result  of  production,  2 
Channels   of    industrial   management, 

insert  between  2  and  3 
Charges,  deferred,  59,  77,  108,  317-18 
Charts  of  organization,  32-45 
Check    Register,    insert    between    80 
and  81,   83.  85-86,  119.   131-40. 
150 
Classification 

of  accounts,  insert  between  52  and 

53,   57-64 
of  industries,  128,  222-37 
of  labor,   195-97 
See  also  Analysis. 
Closing  period,  61 
Closing   the   General   Exhibit,   insert 

343 


between  76  and  77, 102-14,  340- 

41 
Code   numbers,   63-64,   254 
Commercial  expense,   302-3,  324-25 
Committee  organization,  27 
Comptroller,   35-37 
Continuous   manufacturing,    222-29 
Control,    executive,    4-5,    25-45.      See 

also  Organization. 
Controlling  accounts,  46-64.     See  also 
Factory    Accounting,     General 
Exhibit. 
Controlling  records 
Cash  Account,   115-40 
controlling  accounts,  46-64 
convergent  methods,  202-21 
General  Exhibit,    65-114 
process  production.  181-201 
purchases,   141-57 
specific  order  production,   158-80 
Cost  accounting,   importance   of,   2-5. 

See  also  Factory  accounting. 
Costs 

block  system,  214-17 

budget  system,  217-21 

charged  against  departments,  184- 

87 
elements   of,   7-9 
machine-hour   plan,    203-7 
of  production,  62-63,  158-237.     See 

also  Factory  accounting, 
point  system,   207-12 
sheet  system,   212-14 
sold-hour   plan,   203-7 
standard,  187-91 

See    also     Expense ;     Factory    ac- 
counting ;      Labor ;      Material ; 
Purchases. 
Cost  sheets,  164 

Credits,  deferred,  60,  108,  318-19 
Current 
cash  81-83 

Exhibit  entries,  insert  between  66 
and  67,  80-101 
Customers  accounts.   73-75 

Daily 

Exhibit.     See  General  Exhibit. 

report,  74,  99-101 

routine  orders,   193 
Defective  work  report,  196,  269-70 
Deferred  charges,  59,  77,  108.  317-18 
Deferred  credits,  60,  108,  318-19 
Departmental 

accounts,  184-87 

burden,  7-8,  303-16,  326-41 

inventory,    190,    243 

order  numbers,  192-93 
Differential  wage  system,  295 
Diffusion    of    expense,    7-8,    109,    161, 
302-16,  326-41,  insert   between 
340  and  341 


344 


Index 


Economic  accounts,  58,  60-63 
Efficiency 

defined,  10-11 

requirements,   27-28 
Elements  of  production,  1-3,  238-341 
"Estimate  and  test"  plan,  161-62 
Exchequer   accounts,    81-85 
Executive  committee,  27,  38-39 
Executive   control,   4-5,   25-45 
Exhibit,    general.      See    General   Ex- 
hibit. 
Expense,  commercial,  302-3,  324-25 

diffusion  of,   7-8,  109,   161,   299-341 

entries  of,  108-9 

manufacturing,    definition    of,    1-2, 
302-3 

Factory  accounting 
Cash  Account,   115-40 
closing  the  General  Exhibit,  102-14, 

340-41 
controlling  accounts,  46-64 
controlling  records,  46-221 
convergent  methods,  202-21 
current  exhibit  entries,  80-101 
expense,   299-341 
function  of,   3-5 
labor,   271-98 
material,  238-70 
opposition  to,  16-24 
process  production,  181-201 
purchases,  141-57,  247-53,  257-59 
specific  order  production,  158-80 
starting  the  General  Exhibit,  65-79 

Fixed  assets,    59 

Floating  liabilities,  60 

Foreman,    opposition    of,    to    factory 
accounting,  20-21 

Functional   organization,   26 

charting  of,  insert  between  34  and 
35,   38-39 

General  Business  Record.     See  Gen- 
eral Exhibit. 
General  Exhibit,    52 

closing  of,  insert   between  76    and 

77,   102-14,    340-41 
current  entries   in,   insert   between 

66  and   67,  80-101 
starting  of.  65-79 
General  manager,  37,  39 
Going   balance   sheet,   65.     See  Gen- 
eral Exhibit. 
Gross  income,   63 
Guide  lines,   71 
Guide  sheets,  49 

Human  -„  „- 

element  in   organization.  13-24 
phase  of  assembling,  231 

Idle  time,  276-79 

Impersonal  accounts.  57 

Imprest  fund,  72.  115-21 

Income,  63 

Indirect  expense,  304-5 

Indirect  production  departments,  338- 

40 
Industries,  types  of,  128,  222-37 
Intangible  assets,   59 
Interim  statements.  97-101 
Inventory 

departmental,  190.  243 

of   equipment,   194 

perpetual.  62-63,  244-47 


Investment,  5-7 

Invoices.     See  Purchases. 

Job  ticket,  260,  264,  277 

Labor,  271-98 

classification  of,   195-97 

Cost  Summary,  86-87 

direct,  8-9 

point  method.  207-12 

sold-hour  plan.   203-7,   295 

See  also  Costs  ;  Factory  accounting. 
Labor-percentage    plan    of    expense 

diffusion,   305-10 
Liabilities,    59-60,   77-79 

bonded,   59-60 

capital,  60 

deferred  credits.  60,  108.  318-19 

floating.   60 
Line  control,  25 

charting  of,  insert  between  30  and 
31,   35-38 
Liquid   assets,    4,    58 
List-percentage  plan  of  expense  dif- 
fusion,  314-15 
Long  and  short  leaf  book,  62,  66-67 
Loss   and   gain 

assigned    to   departments,    186-87 

does   not    cover    nominal   accounts, 
58 

the  index  of  efflciency,  11-12,  34 

Machine 

numbers,  193,  195-97 

report,   197-98 
Machine-hour  plan,  203-7,  277-78,  295 

applied  to  expense,  313-14 
Management 

channels,  insert  between  2  and  3 

opposition    of,    to    factory    account- 
ing, 16-19 
Man-hour  plan  of  expense  diffusion, 

310-12 
Manufacturing.     See  Production. 
Mass  products,  183-84 
Material.   238-70 

audit   of,   238-44 

bill  of,   174,   266 

cost  of,  8,  182,  238-70 

issuance  cards,   150,   152,   156,   160, 
261-66 

Ledger,   244-70 

point  system,   209-12 

purchases  of,   105-7,  247-53,  257-59 

used,  report  form  for,  169 

various  forms   for,   267-70 

waste  of,   238-44 

See   also   Costs ;    Factory   account- 
ing ;  Purchases. 
Mechanical  aids 

for  the  Production  Register,  173-76 

for  time  records,   283-88 
Mechanical  phase  of  assembling,  232- 

33 
Military  organization,  25 

charting  of,  insert  between  30  and 
31,  35-38 
Nominal  accounts,   58,   60-63 
Nonproductive  time,  276-79,  289 
Notes   receivable,    72-73 
Numbering  of  orders,  192-95 

Opposition  to  factory  accounting,  16- 
24 


Index 


345 


Orders,   9.   32,  39-42 
block    system,    214-17 
budget  system,  217-21 
charting  routine  of,  36.  42-45 
finished,  146,  259-61 
numbering  of,  192-95 
purchase.     See  Purchases, 
rush.  213-14 
sheet  system,   212-14 
specific,  accounting  for,  158-80 
tags  for,  162-63.  166.  213.  265-66 
Organization 
charts.   32-45 
committee.  27 
efficiency   in,  27-31 
functional,    26.    insert    between   34 

and    35.   38-39 
human  element  in.  13-24 
line,  25,  insert  between  30  and  31. 

35-38 
military.     See  line, 
responsibility,    25-31 
staff.     See  functional, 
synthesis  and  analysis  of.  1-12 
types  of.  25-27 
Overhead.     See  Expense. 

Passive  assets,   58-59,   75-77 

Pay  roll,  154.  288-95,  insert  between 

300  and  301,  309 
Period,  closing,  61 
Perpetual   inventory,    62-63,   244-47 
Personal  accounts,  57 
Physical  audit,   238-44 
Planning  rack,  279-83.  285 
Point  method,   120.  207-12 
Premium  system,  295-98 
Preparation,  labor  in,   196 
l^rerequisites  to  production,  1-4 
Prices 

based  on  guessing,  3-4,  302 
based  on  standard  costs,   191 
Private  Ledger,  49 
Process 

Account.  184-87 

plan  of  expense  diffusion.  315-16 
production.  181-201 
Product 

forces  resulting  in.  9-10 
mass,    183-84 

standard    grades    of.    184.    229-30. 
235-36 
Production 

assembling    224.    229-37 
antecedent.  229-33 
reciprocal,    233-37 
continuous,  222-29 
analytic,    227-29 
synthetic,  225-27 
convergent  methods  of  accounting 

for,   202-21 
cost,   62-63.     See  also  Factory  ac- 
counting, 
definition  of,   1 
industries,  types  of,  222-37 
prerequisites   of,   1-4 
process.   181-201 
Register.  87.  107,  164-80,  191-97 
specific  order,  158-80 
summaries,   98,   104,   106,   110,   116- 

17,  197-201 
zones,  4-12 
Product  list  numbers,  193-95 
P>roflts,    prospective,    5,    7.      See   also 
Loss  and  gain. 


Purchases,   84,   105-7,   247-53,   257-59 
analysis  of,   86.   136-37.  146-51 
antecedent  records  of,  141 
entries  of.  151-57 
order  form  for.  138 
voucher  system  for.  142-46 

Real  accounts,  57-60 
Receiving  sheet,  267 
Reciprocal     assembling     preparation. 

Records,  controlling.     See  Controlling 

records. 
Representative  assets.  59 
Reserves.     See  Defejred  Credits 
Responsibility.   25-31 
Revenue,  63 
Rush  orders,  213-14 

Sales 

expense  of,  302-3,  324-25 

in  the  General  Exhibit,  102-5 

manager.    11-12 

Summary,  87-88 
Secured  funds,  73 
Sheet  system,   212-14 
Sold-hour  plan,  203-7,  295 

applied  to  expense,  312-13 
Bpedflc  order  production,  158-80 
Staff  organization,  26,  insert  between 

34   and   35.   38-39 
Standard 

costs,  187-91 

grades  of  product.  184.  229-30.  235- 
36 
Standing  orders.   40 
Hurting   the   General   Exhibit.   65-79 

Ledger,   130,   244-70 
report,    185,   243 
Stores  Ledger,  130,  244-70 
Subsidiary   records,    85-87.      See   also 
under     the      various     records 
named. 
Superintendent 

opposition   of,   to   factory  account- 
Ing,  19-20 
Suspense  items.   See  Deferred  charges 
Synoptic.     See  General  Exhibit. 
Synthesis 

of  organization,   1-12 
Synthetic  manufacturing,  225-27 

Tests 

of  standard  costs,  188 
Time 

keeper,  274,  281 

recorder,    273-76 

records,  8-9,  198,  203-7,  268,  271-97 

stamp  card,  219.  222 

See  also  Factory   accounting 
Traveling  foreman.  118 

"Utilitarian"  cost,  186 

Vice-president,    35 
Voucher  Register,   143-44 
Voucher  system,  142-46 

Waste  of  material,  238-44 
Workmen,    opposition    of,    to   factory 

accounting,   21-24 
Works   manager,   37-38 

Zones  of  production.   4-12 


This  book  is  DUE  on  the  last  date  stamped  below 


193^ 


s."*'.'.^^-*^ 


[JTHERM  BRANCH, 


IT 


ORNIA, 


